Gorbold and Zouh
[2019] FamCA 619
•4 September 2019
FAMILY COURT OF AUSTRALIA
| GORBOLD & ZOUH | [2019] FamCA 619 |
| FAMILY LAW – COSTS – Where the applicant seeks costs on an indemnity basis – Where the respondent was wholly unsuccessful in the proceedings – Where the respondent failed to comply with various directions throughout the course of the proceedings –Where the applicant was the second respondent in the substantive proceedings and had intervened on a bona fide basis – Where the applicant was forced to incur significant legal costs while the respondent did not incur any – Where there was an offer of settlement on the part of the applicant – Where the Court found it just to make an order for costs – Where the Court was not satisfied that the respondent’s conduct should give rise to an order for indemnity costs – Where it was unlikely that the respondent had the capacity to meet a significant costs order against her – Orders made for costs to be paid in a fixed amount. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules (Cth) r 19.18 |
| Colgate-Palmolive Co. and Anor v Cussons Pty Limited (1993) 118 ALR 248 Woodley & Time and Anor [2008] FamCA 162 |
| APPLICANT: | Ms Gorbold |
| RESPONDENT: | Ms Zouh |
| FILE NUMBER: | SYC | 1569 | of | 2015 |
| DATE DELIVERED: | 4 September 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Johnston J |
| HEARING DATE: | 20 August 2019 |
| REPRESENTATION |
| SOLICITOR FOR THE APPLICANT: | Mr Roser |
| FOR THE RESPONDENT: | No appearance |
Orders
Ms Zouh pay to Ms Gorbold the sum of 20,000 being the Court’s assessment of Ms Gorbold’s appropriate costs in these proceedings.
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 Gorbold & Zouh 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).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 1569 of 2015
| Ms Gorbold |
Applicant
And
| Ms Zouh |
Respondent
REASONS FOR JUDGMENT
This is an application by Ms Gorbold, the second respondent in the substantive proceedings, for an order for costs.
Ms Gorbold is the daughter of Mr Gorbold (“the husband”). The husband and Ms Zouh (“the wife”) were previously married. Their marriage broke down and the wife commenced property proceedings.
The husband and Ms Gorbold had owned a property at J Street, Suburb G, New South Wales (“the J Street property”) as tenants in common. In 2014, after the husband and wife had separated, the husband transferred his interest in the J Street property to Ms Gorbold for $1.
The wife filed an application seeking an order that this transfer be set aside pursuant to s 106B(1) of the Family Law Act 1975 (Cth) (“the Act”). Ms Gorbold clearly had an interest in the proceedings and was joined to the proceedings as the second respondent.
On 7 June 2019 I made an order dismissing the wife’s application for the Reasons published that day. In these circumstances, Ms Gorbold seeks the following orders:
1.The Respondent pay the Applicant’s costs of the proceedings on a party/party basis from 22 October 2015 to 18 May 2016 and on the indemnity basis from 19 May 2016 to date, pursuant to rule 19.18(b) of the Family Law Rules (Cth) (the Rules).
2.In the alternative, the Respondent to pay the Applicant’s costs of the proceedings on a party/party basis, pursuant to rule 19.18(b) of the Rules.
3.The Respondent to pay the Applicant’s costs of this application.
There was no appearance by Ms Zouh at the costs hearing but I was satisfied that she had been made aware of the hearing based on certain oral evidence given by Ms Gorbold. This was to the effect that Ms Gorbold had experienced some difficulty serving Ms Zouh whom she said is currently residing with her father, the first respondent in the substantive proceedings. Ms Gorbold said that she had paid a visit to their residence a couple of days prior to the date of the costs hearing, handed Ms Zouh her affidavit and informed Ms Zouh that the matter was in court today. In the substantive proceedings I made a finding that I had no hesitation in regarding Ms Gorbold as a witness of truth. Accordingly, I accept her oral evidence about this matter.
Subsection 117(1) of the Act provides that the general rule in relation to costs is that each party to proceedings under the Act shall bear his or her own costs. That is subject to a power provided in s 117(2) of the Act for the Court, if it is of the opinion that there are circumstances that justify it in doing so, to make such order in relation to costs as the Court considers just. In considering any such order, the Court is to have regard to the relevant matters pursuant to s 117(2A) of the Act.
The first of such matters is the financial circumstances of each of the parties. I do not have precise details of Ms Gorbold’s financial circumstances. In the substantive proceedings, however, it was clear that she owns her legal practice, B Pty Ltd and she owns equity in the J Street property. It was also clear that Ms Gorbold has been able to pay substantial expenditure on behalf of her father and she has filed an affidavit indicating that she has been paying significant expenditure for her half-sister, Y, who is currently 11 years of age.
On the other hand, what Ms Zouh’s current financial circumstances might be is currently unknown to the Court because Ms Zouh has not participated in these costs proceedings. It is the case, however, that at the time the substantive proceedings were before the Court in February 2018, a submission was made in Ms Gorbold’s case to the effect that Ms Zouh was “of such modest means that she has no prospects of meeting her legal fees or any costs order in the event that she shall fail in her application”. There was no admissible evidence in the costs proceedings to shed any further light on what Ms Zouh’s current financial position might be. Doing the best that I can in these circumstances, in my view it is more probable than not that Ms Gorbold is in a much more favourable financial position than Ms Zouh.
In relation to the conduct of the parties concerning the preparation and prosecution of the proceedings, it is submitted on behalf of Ms Gorbold that Ms Zouh failed to make full and proper disclosure and failed to comply with various directions made in the substantive proceedings. I have read the material tendered in respect of this submission and I accept that there is some force in this.
It is clearly the case that Ms Zouh has been wholly unsuccessful in the proceedings.
It is also clear that a written offer was made by Ms Gorbold in the form of a letter dated 18 May 2016 from her solicitors to Z Business, who were solicitors acting for Ms Zouh during the substantive proceedings. Omitting formal parts, the letter is as follows:
It is clear from the evidence that your client has no claim against our client. Our client is concerned that despite this, your client is intent on proceeding with her Application which will cause all parties to incur significant legal costs.
To bring the matter to an end, our client is prepared to consent to an Order that your client’s Application be dismissed with no order as to costs, so that each party pays their own costs of and incidental to the proceedings. This offer is open for acceptance by your client for a period of 14 days from the date of this letter.
If it is not accepted by your client within that period, our client will be seeking an Order that your client pay her costs of and incidental to the proceedings on an indemnity basis.
It is submitted on behalf of Ms Gorbold that this offer made it perfectly clear to Ms Zouh that if she was to proceed further with what was said to be an unmeritorious claim, Ms Gorbold would be seeking an order for her costs. In my view, the question which arises is whether it was reasonable for Ms Zouh to continue to pursue her substantive application at that point in time.
It was submitted on behalf of Ms Gorbold that by that time the evidence in the substantive proceedings had been filed by all parties, the proceedings being in the Federal Circuit Court at that time. In particular I was pointed to an affidavit sworn by Ms Gorbold in the proceedings which had been filed on 9 October 2015 and sworn on 2 October 2015. That affidavit is in very similar form to Ms Gorbold’s affidavit in the substantive proceedings before me. Accordingly, in my view, there is some force in the submissions by Mr Roser about the relevance of the offer. In my view, Ms Zouh and her lawyers, upon becoming aware of the financial detail contained in Ms Gorbold’s affidavit, particularly as it was supported by voluminous annexures containing details of statements of account and other financial details, would have needed to have considered very carefully, in light of such material, whether Ms Zouh had a meritorious case. A reading of the affidavit would have indicated that there were some issues to be determined at trial. But in my view, given the very carefully prepared affidavit and very detailed annexures, one would have considered the deponent of such a relevant and detailed affidavit would be likely to be an impressive witness and likely to be believed about her evidence in relation to most of the issues. This of course is what occurred.
At this point, Ms Gorbold had incurred legal costs of almost $34,000. On the other hand Ms Zouh had not had to make any payment to her lawyers who had agreed to represent her on a speculative basis, that is, “no win, no fee”. The consequence of the proceedings not having been able to be resolved at this point was that Ms Gorbold incurred an additional $119,363 in further costs, her total costs in the proceedings amounting to $153,135.
In my view, in circumstances where Ms Gorbold’s case was so clear, there was a clear obligation on Ms Zouh to very carefully consider whether in the light of such detailed evidence she was likely to obtain a property order. No doubt Ms Zouh’s lawyers were bound by their instructions.
Mr Roser referred to Woodley & Time and Anor [2008] FamCA 162 where Benjamin J said as follows:
A third party intervening in or being joined to Family Law property proceedings is generally drawn into such litigation [to] maintain, protect or assert some proprietary property right. They are generally strangers to the marriage or relationship. To become involved in such litigation almost inevitably imposes substantial cost on the intervenor and adds to the costs of the paries [sic] to the marriage. Considerable weight needs to be given to the reasons for a third party to intervene. The bona fides of such intervention should be considered, including any question/s as to whether the intervention is based upon substantial grounds or is driven by tactical factors.
The Court should be robust in exercising its discretion to make a costs order in favour of a third party where there is substantial basis for the third party intervention. Conversely, if the intervention by a third party is tactical and/or disingenuous a Court should be equally robust in exercising its discretion to make costs orders against third parties.
In the present case there is no question of the bona fides of Ms Gorbold nor about the fact that the application by Ms Zouh in the property proceedings involved her in seeking an order to set aside the transfer to Ms Gorbold of property by her father. Clearly this involved a substantial proprietary right so there can be no question about there being a proper basis for Ms Gorbold to intervene.
Mr Roser also submitted that impecuniosity is not in itself a bar to a successful application for costs. I accept this but there can be no question that impecuniosity is a relevant consideration.
It was also submitted on behalf of Ms Gorbold that she is involved in a physical sense in the care of her half-sister Isabel and that she frequently collects the child from school because Ms Zouh has not been available to do so. It is also submitted that Ms Gorbold meets a significant part of the child’s schooling and other costs and that these matters ought to be taken into account. I must say I am struggling to understand the relevance of these matters in the costs proceedings.
Ms Gorbold also said that she provides some financial assistance to Ms Zouh whom, as indicated above, is living with Ms Gorbold’s father. I accept that this is probably the case because I have found in the substantive proceedings that Ms Gorbold had met significant components of her father’s costs and liabilities so it is hardly surprising that such largesse on her part would continue.
Had it not been for the written offer by Ms Gorbold, in my view there would be no basis for making any costs order in these proceedings. As I have said, the usual position is for a party to proceedings to meet their own costs. Ms Gorbold found herself drawn into the proceedings because her financial circumstances had become heavily enmeshed with those of her father who was in a married relationship with Ms Zouh, which had broken down.
As Mr Roser submitted, there is an unfairness in the situation where Ms Gorbold was drawn into the proceedings and has had to pay substantial costs, whereas on the other hand, Ms Zouh was given “a free kick” because she could simply continue the proceedings past the point at which the offer was made at no cost to her. This was because of the speculative arrangement she had obtained from her lawyers. I accept that there is some force in this.
In all the circumstances and taking account of s 117(1) of the Act, the financial circumstances of the parties, Ms Zouh’s conduct in the proceedings, the enmeshment of Ms Gorbold’s financial affairs with those of her father, the fact that Ms Zouh was wholly unsuccessful in the proceedings and the fact of the making of the offer and its refusal, in my view, some costs order would be just in the circumstances. I am not persuaded, however, that Ms Zouh would have much capacity to pay a costs order in a substantial amount. It might be the case however, that her financial circumstances might be more favourable than appeared during the substantive proceedings or that in future, she might come into funds which would enable her to pay a costs order. In all the circumstances, I propose to order that Ms Zouh pay to Ms Gorbold the sum of $20,000.
There was a submission by Mr Roser that so unsuccessful were the proceedings and taking account of the offer that any court order would be an order that Ms Zouh pay on the indemnity basis. I note that in Colgate-Palmolive Co. and Anor v Cussons Pty Limited (1993) 118 ALR 248 Sheppard J in the Federal Court of Australia observed some of the circumstances in which indemnity costs orders have been made. His Honour indicated that these include the making of allegations of fraud knowing them to be false, particular misconduct that causes loss of time to the court and parties, commencing or continuing proceedings for some ulterior motive, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise, as well as contempt. In my view, in the present case, although Ms Zouh refused the offer I am not persuaded that the circumstances of so doing were such as to make an order on the indemnity basis.
I certify that the preceding twenty five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 4 September 2019.
Associate:
Date: 4 September2019
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