Grefeld and Grefeld & Anor (Costs)
[2016] FamCAFC 30
•2 March 2016
FAMILY COURT OF AUSTRALIA
| GREFELD & GREFELD AND ANOR (COSTS) | [2016] FamCAFC 30 |
| FAMILY LAW – APPEAL AGAINST COSTS ORDERS – Where the trial judge made an order for costs in favour of a third party in property proceedings between husband and wife – where the wife appealed – where the Full Court upheld the trial judge’s orders accepting that costs orders are particularly within the discretion of a trial judge especially in circumstances where the challenge to the costs orders was based upon the contents of documents before the trial judge – appeal dismissed. |
| Family Law Act 1975 (Cth) ss 117(1), (2) and (2A) Family Law Rules 2004 (Cth) r 22.22(2) |
| Capoccello and Capoccello [2006] FamCA 300 Grefeld & Grefeld and Anor [2012] FamCAFC 71 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Harris and Harris (1991) FLC 92-254 |
| APPELLANT: | Ms Grefeld |
| FIRST RESPONDENT: | Mr Grefeld |
| SECOND RESPONDENT: | Ms J Grefeld |
| FILE NUMBER: | BRF | 2504 | of | 2005 |
| APPEAL NUMBER: | NA | 90 | of | 2010 |
| DATE DELIVERED: | 2 March 2016 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Strickland & Austin JJ |
| HEARING DATE: | By way of written submissions |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 22 June 2010 |
| LOWER COURT MNC: | [2011] FamCA 478 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Galloway |
| SOLICITOR FOR THE APPELLANT: | Peter J Sheehy Solicitors |
| FIRST RESPONDENT: | In person |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr McGregor |
| SOLICITOR FOR THE SECOND RESPONDENT: | Jones McCarthy Lawyers |
Orders
The appeal against the orders with respect to costs made by the Honourable Justice Barry on 22 June 2011 be dismissed.
There be no order for costs in relation to the appeal referred to in Order 1 of these orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Grefeld & Grefeld and Anor (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 90 of 2010
File Number: BRF 2504 of 2005
| Ms Grefeld |
Appellant
And
| Mr Grefeld |
First Respondent
And
| Ms J Grefeld |
Second Respondent
REASONS FOR JUDGMENT
These reasons for judgment relate to an appeal by Ms Grefeld against costs orders (the terms of which will later be set out) made in favour of Ms J Grefeld by Barry J on 22 June 2011.
These reasons need to be read in conjunction with the reasons for judgment published by this Full Court on 1 June 2012 and on 16 April 2015 in relation to proceedings between Ms Grefeld and Ms J Grefeld, and also involving Mr Grefeld, who is the former husband of Ms Grefeld and the brother of Ms J Grefeld; he is resident in Germany and has at all relevant times appeared in the proceedings by telephone from Germany without legal representation.
As has been done in our earlier reasons, Mr Grefeld will be referred to in these reasons as “the husband”, Ms Grefeld as “the wife” and Ms J Grefeld as “the sister”.
Background: the trust proceedings
In our reasons of 16 April 2015 we provided the following summary of the history of this case (as recorded in our reasons of 1 June 2012):
· In 1983 the sister granted a power of attorney to the husband in Germany.
· In 1996, in reliance upon the power of attorney, but without the sister’s knowledge, the husband withdrew funds from the sister’s European bank account and used those funds to purchase a property at E Road, Suburb B.
· The contract to purchase that property was in the wife’s sole name as purchaser, but the contract was executed by the husband on her behalf. Once the funds (from the sister’s account) were paid by the husband to the vendor to complete the contract, title was registered in the sole name of the wife. The wife was ignorant of the source of the funds.
· Subsequently, the wife joined the sister to property settlement proceedings between herself and the husband, and sought an order that the sister transfer another property (at D Street) to her. This claim by the wife against the sister was later abandoned.
· Once joined in the property settlement proceedings, the sister filed a Response seeking the transfer of the E Road, Suburb B property to her, alleging that the wife held that property on either a resulting or a constructive trust for her because of the circumstances of its acquisition. The wife and the husband denied this claim.
The property settlement proceedings (including the sister’s trust claim) were heard by Barry J on 1-3 June 2010. On 22 June 2010 his Honour made orders which included a declaration of trust that the wife held the E Road, Suburb B property on trust for the sister and a consequential order for the transfer of that property to the sister. His Honour otherwise adjourned the property settlement proceedings to a date to be fixed (apparently on the understanding that as between the husband and the wife the proceedings had been resolved).
The essential finding made by Barry J in his reasons for judgment delivered on 22 June 2010 was that the wife held the property on a constructive trust for the sister because it had been acquired with the sister’s money in circumstances involving a breach of the fiduciary duty owed to her by the husband.
On 1 June 2012 this Full Court dismissed an appeal by the wife
(in which she was supported by the husband, although he was not an appellant) against Barry J’s declaration of a trust of the property in favour of the sister. In dismissing the appeal, we rejected the wife’s arguments that his Honour had erred:
· in finding that the husband owed a fiduciary duty to the sister by virtue of the power of attorney and that he had breached that duty; and
· in not finding that the wife’s title was indefeasible under Queensland real property law, or impregnable under the principles which emerge from the decision of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
Our essential conclusion was that the facts as found by Barry J permitted the imposition of a constructive trust in the sister’s favour.
Background: the costs proceedings
In his orders of 22 June 2010, Barry J had provided for written submissions to be filed by the sister in relation to the costs of the proceedings which had been before him and for any necessary responding submissions to be filed by the wife and by the husband.
Such submissions were then filed on behalf of the sister and of the wife. Whether any submissions were filed by the husband is not clear. On 22 June 2011 Barry J made orders that the wife and the husband be jointly and severally liable for the sister’s costs in relation to the proceedings. The precise terms of his Honour’s costs orders were:
(1)The [wife] and the [husband] jointly and severally be liable for the costs of the [sister] but only to the extent as detailed in these Orders.
(2)The [husband] pay the costs of the [sister] on an indemnity basis to include the sums of:
a. $513.33 for the one third share of an updated joint valuation; and
b. $1,000 in relation to the translation of European documents.
(3)The [wife] pay the costs of the [sister] on a party and party basis to include the sums of:
a.$513.33 for the one third share of an updated joint valuation; and
b. $1,000 in relation to the translation of European documents.
In our orders of 1 June 2012 (in relation to the appeal against the trust declaration and consequential order), we granted the wife an extension of time to file a Notice of Appeal against the costs orders made by Barry J on 22 June 2011, and we permitted her to rely on a document headed “Further Amended Notice of Appeal” (which contained only grounds of appeal and orders sought) filed in court on 12 August 2011 as her notice of appeal against the costs orders. We also gave all other parties 28 days from the making of our orders to file any notice of appeal or cross-appeal against the costs orders, and we provided for the Appeal Registrar to make directions for the filing of written submissions in relation to the wife’s appeal (or any other appeal or cross appeal filed) against the costs orders.
In our reasons for judgment of 16 April 2015, we explained in some detail the events which followed the making of directions by the Appeal Registrar for the filing of submissions in relation to the appeal against the costs orders. We also explained the uncertainty which existed as to whether or not the husband was also an appellant against the costs orders, and the consequent necessity for the Appeal Registrar to ascertain from the husband what his position was.
The Appeal Registrar subsequently informed us that the husband had advised her that he did “not seek to file a notice of appeal”.
We therefore proceed on the basis that it is only the wife who appeals the costs orders. We will, however, in determining the wife’s appeal give consideration to the husband’s written submissions to the extent that they support that appeal.
The ground of appeal against the costs orders
The wife’s sole ground of appeal against the costs orders, as contained in her further Amended Notice of Appeal, is that his Honour “erred in ordering [the wife] to pay costs in circumstances where she had innocently acquired her title”. The “title” referred to in the ground can be assumed to be the title to the E Road, Suburb B property.
Notwithstanding the provision in the Family Law Rules 2004 (Cth) (r 22.22(2)) which requires that a summary of argument, filed for the purposes of an appeal, should set out each ground of appeal and a statement of the arguments in support of that ground, the wife’s written submissions in support of the costs appeal make no reference to the actual terms of the ground of appeal. Nevertheless, we are prepared to consider those submissions in an attempt to establish if they support the ground. A consideration of those submissions will, however, require consideration first of the submissions on the issue of costs which were made to the trial judge (which are also relied on before us), and then of his Honour’s reasons for the costs orders. We will endeavour to deal with these matters as briefly as possible.
Submissions to the trial judge
In submissions filed on 6 July 2010 the sister sought orders that the wife and the husband pay her costs of and incidental to the first instance proceedings on an indemnity basis in the sum of $132,765.82, plus $513.33 on account of the sister’s share of certain costs of valuations and $1,000 on account of her costs of the translation of European documents.
After providing a chronology of the proceedings from the time of the filing of the wife’s application against the husband for property settlement on 1 September 2005 until the hearing before the trial judge in June 2010, and then referring to the provisions relating to costs in s 117(1), (2) and (2A) of the Family Law Act 1975 (Cth), the sister’s submissions explained that her involvement in the proceedings related to her interest in the properties at D Street and E Road, Suburb B.
In relation to the D Street property, it was explained that the sister had been joined in the proceedings on 29 November 2006 on the application of the wife in which the wife sought a declaration that the sister held that property on trust for the husband. It was also explained that the application for that declaration was not formally withdrawn until the morning of the second day of the trial, 2 June 2010.
In relation to the E Road, Suburb B property, it was explained that the sister had sought a declaration that she beneficially owned that property in her response filed on 1 February 2007 (to the wife’s application in relation to the
D Street property), and that during the course of 2007 and early 2008 various bank documents and correspondence were disclosed by the sister in support of her claim. It was then submitted that it “ought to have been clear to the husband and the wife from as early as 25 February 2008 that the [sister’s] funds were used to purchase the property at [E Road, Suburb B]”.
The submissions of the sister next addressed the various matters contained in s 117(2A) which are to be taken into account by a court when considering whether to make a costs order. A number of those matters were acknowledged not to be applicable. However, reliance was placed on:
a)the financial circumstances of the husband and the wife, with it being submitted that they had the capacity to meet an indemnity costs order;
b)the conduct of both the husband and the wife in relation to the proceedings;
c)the success of the sister’s claims in the proceedings; and
d)her position as a third party who had been joined in the proceedings and who in a civil court would ordinarily have had her costs.
The sister’s submissions which were directed to the conduct of the wife in relation to the claims concerning both the D Street and the E Road, Suburb B properties were lengthy and very detailed. Further reference will be made to them when we consider the trial judge’s reasons for the costs order.
The wife’s submissions in response (which were attached to an affidavit by her solicitor) disputed the assertion that it would have been clear to her by
28 February 2008 that the sister’s funds were used to purchase the E Road, Suburb B property, with it being claimed by the wife that the sister and the husband had failed to make adequate disclosure (at least so far as the sister was concerned, until 2 June 2009).
In support of the submission that the sister’s beneficial ownership of E Road, Suburb B could not have been clear to the wife, and that therefore she had no other course than to “reserve” her position with respect to the source of the purchase funds for that property, the wife also relied on the inconsistent evidence provided by the husband.
Reliance was also placed by the wife on an alleged refusal on the part of the sister to attend mediation, and on her own poor financial position compared with that of the sister.
In summary, the wife’s position was that the sister should pay her own costs of the proceedings, but if the sister was to receive her costs, they should be paid by the husband only.
Reasons of the trial judge
In his reasons in relation to the costs orders, his Honour outlined in some detail the submissions made to him on behalf of both the sister and the wife, and in the course of so doing, he indicated whether he accepted or rejected a particular submission.
His Honour expressly accepted (at [19]) the submission that the wife’s conduct had contributed to the sister’s costs, and in this context he also accepted
(at [22]) the accuracy of the following submission made at page 12 paragraph 3 (e) of the sister’s submissions:On the morning of the first day of the trial (1 June 2010) the Wife’s Counsel gave notice of a change of defence. In the new defence, the Wife abandoned her rejection of the [sister’s] claim to have paid for [E Road, Suburb B]. This is to say that from the time of the [sister’s] final disclosure of evidence on 25 February 2008 until 1 June 2010 (a period including the filing of the [sister’s] evidence-in-chief on 2 June 2009 and her affidavit in reply of 8 July 2009) the Wife made no gesture to acknowledge the force of the [sister’s] evidence, yet on the first day of the trial her change of defence was, in effect, an admission that the weight of evidence in favour of the [sister’s] claim was irrefutable. This concession ought to have been made immediately (or within a reasonable time) after the [sister’s] final disclosure of evidence on 25 February 2008. The very latest that the concession ought to have been made was at the time of the [sister’s] provision of translations of all those documents that were disclosed by February 2008, namely immediately (or within a reasonable time) after the [sister’s] affidavit of evidence-in-chief was filed on the 2 June 2009.
His Honour also expressly accepted (at [26]) the sister’s submissions that she had been wholly successful in the proceedings, and that she was a third party brought into the proceedings on the application of the wife and as such was in the position of a litigant in the civil courts who would ordinarily have had her costs.
When considering the submissions of the wife, his Honour returned to the sister’s claim that it ought to have been clear to the wife that by 25 February 2008 the sister’s funds had been used to purchase the E Road, Suburb B property saying (emphasis added):
27. At page 4 of [the sister’s] submissions the point was made:
It ought to have been clear to the Husband and the Wife from as early as 25 February 2008 that the [sister’s] funds were used to purchase the property at [E Road, Suburb B] and that there was no basis disclosed by either the [wife] or the [husband] to defeat her claim that the property was held on trust for her.
28. On behalf of [the wife] in response, it was submitted:
It was not clear to the Applicant Wife as early as
28 February 2008 that the [sister’s] funds were used to purchase the property at [E Road, Suburb B]. The Wife’s case rested completely in the hands of the Husband for production of documents from Germany to be able to make disclosure. In the absence of complete disclosure, the Wife’s position in not accepting the assertions by the Respondent Husband as to the provision of the funds and the source of the funds was not an unreasonable one.29. What this submission overlooks is the fact that there had been affidavits filed by [the sister’s] solicitor of the 5 July 2007 and the 9 December 2008. These affidavits annexed bank documents which prima facie indicated that the transfer of the funds for the purchase of the [E Road, Suburb B] property came from an account in [the sister’s] name.
30. At paragraph 2 of the submissions made on behalf of the Wife it is noted:
The [sister] and the Husband failed to adequately provide proper disclosure of documents throughout the case. Indicative of this was the position of the [sister] over a six month period on at least two directions hearings before his Honour, the [sister] indicated that she intended to travel to Germany to inspect a “warehouse full of documents”.
31.Throughout much of the litigation it was abundantly clear that [the sister] was in Germany endeavouring to get access to the source documents. [The wife] held her title by virtue of the fact that the moneys were transferred directly from [the sister’s] account to the solicitors’ trust account. All of this was done under the instructions of [the husband]. I do not accept that the Wife is able to rely on [the sister’s] failure to produce documents when clearly the documents were under the control of [the husband] and he had been responsible for arranging for the transfer of funds for the acquisition of the property.
32. At paragraph 3 of the Wife’s response it is submitted:
“3.As conceded by the [sister] (page 4.2) the documents asserted by her to support her claim, were finally annexed to her affidavit of evidence-in-chief of 2 June 2009.”
33. I accept that the documents were annexed to the affidavit of evidence-in-chief of [the sister] on the 2 July 2009 but it ignores the fact that the relevant documentation had previously been annexed to the affidavit of [the sister’s] solicitor in the affidavits referred above namely the ones filed by leave on the 5 July 2007 and 9 December 2008.
Then in relation to the wife’s submission that the sister had declined or refused to attend mediation, his Honour stated that he was not convinced that that was a relevant factor in the determination of this costs matter.
His Honour next turned to the wife’s financial position, and he can be read as accepting the submission that it was poor, and also that the sister’s financial position was “advantageous” by comparison. However, his Honour considered that this was not “a compelling reason why [the sister] should not be awarded her costs”.
Although he observed that any award of costs against the husband was “likely to be a pyrrhic victory” in that the husband was unlikely to comply with such an order, his Honour, nevertheless, concluded that he had no hesitation in making an order that the husband pay the sister’s costs on an indemnity basis.
However, his Honour went on to say that he would not award indemnity costs against the wife for the following reasons:
·I accept that her financial position is likely to be precarious in the future. She owes her mother in excess of $150,000 for moneys borrowed for legal expenses.
·She will have the party and party costs to be paid to [the sister].
·It is likely she will have to sell the vacant block of land.
·She will incur significant capital gains in the event of such a sale.
·The income she has at her disposal is modest.
·Such amount as she receives from the sale of the vacant block of land would be used to either earn interest to assist in supporting herself or used to acquire a modest residence for herself.
·She says she owes her mother $617,000 but there is no evidence she is under any pressure to repay this amount.
After setting out his reasons for not ordering the wife to pay costs on an indemnity basis, his Honour continued:
50.A further reason for declining to order indemnity costs as against [the wife] is that she was largely a silent player in [the husband’s] manipulation of the family’s fortunes. Whilst she was not an active participant in the misuse of [the sister’s] moneys, she was entitled for a period of time to be sceptical of [the husband’s] claims as to the source of the moneys used to acquire the [E Road, Suburb B] property.
51. I am satisfied that she was not entitled to contest the proceedings in the way that she did based on the documentary evidence that was placed before the Court, but her conduct was not such as to find the special circumstances necessary to justify an award of indemnity costs.
For purposes of the determination of this appeal, it is necessary having regard to his Honour's comments in [50] and [51], to also draw attention to the following observations, which he had made earlier in his reasons:
43.… I accept the force of the submission made at paragraph 12 [of the wife’s submissions] that the proof of the source of the funds was not necessarily conclusive evidence of the ownership of the funds. The fact remains that [the wife] should have been put on alert that there was a real possibility that moneys emanating from an account in [the sister’s] name found their way to the solicitor’s trust account and thereafter were used to settle the acquisition of the [E Road, Suburb B] property. Because of [the husband’s] conduct, there may have been some doubt on [the wife’s] part, but she was in receipt of documentation at an early stage which should have caused her to consider her position in relation to the claim to both [D Street] and later [E Road, Suburb B].
Submissions on the appeal
At the commencement of the wife’s submissions in support of her appeal, many of the paragraphs from the trial judge’s reasons which we have already set out in these reasons, are also set out, in full or in part, (notably [28], [29], [32], [43] and [51]), with it then being submitted that his Honour’s conclusions about the conduct of the case by the wife are “not sustainable when regard is had to the position of the [wife] throughout the proceedings”. It is then asserted that in respect of the E Road, Suburb B property, the wife was “totally reliant” on evidence produced by the husband and that his conduct “was in all respects the cause of the matter ultimately having to be heard at trial”.
The wife’s submissions proceed to trace the history of the affidavit evidence filed first by the husband and then by the sister, and there is then an attempt to explain why it was necessary for the wife to join the sister in the proceedings in relation to the D Street property.
The wife’s submissions conclude by repeating the assertion that his Honour’s conclusions were not sustainable given the state of the evidence from the husband and the sister.
In her responding submissions the sister draws attention in particular to [29], [32], [33] and [43] of the trial judge’s reasons (which also appear earlier in these reasons) where his Honour’s findings were to the effect that the wife was from an early stage of the proceedings in receipt of documents which should have caused her to consider her position in relation to the claims concerning the E Road, Suburb B and the D Street properties.
The sister’s submissions also draw attention to the change in the wife’s case on the first day of the trial which was a matter relied on by the sister before his Honour and was recorded by him at [22] of his reasons (see [28] of these reasons). Thus, it is submitted for the sister that this was an entirely appropriate case for the trial judge to exercise his discretion to order that the wife pay the sister’s costs.
It is also submitted on behalf of the sister that the wife’s submissions ignore the fact that it was the wife who joined the sister to the proceedings with the claim concerning the D Street property, with that claim then being abandoned on the second day of the trial. On this basis alone, it is submitted, the sister was entitled to her costs.
Discussion and conclusion
Despite the attempts by the wife in her submissions to the trial judge and to us to refute the sister’s claim, made in support of her application for costs, that it ought to have been clear to the wife from an early stage in the proceedings, that the sister’s funds were used to purchase the E Road, Suburb B property, we are not persuaded that we should interfere with his Honour’s acceptance of this claim by the sister, and thus with his consequent costs orders in the sister’s favour against the wife.
The following statement by the Full Court (Ellis, Strass and Lindenmayer JJ) in Harris and Harris (1991) FLC 92-254 at 78,711 has long been accepted by this Court:
… Orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.
This statement by the Full Court in Harris has, in our view, particular relevance to the present case where, as will have been seen from our summary of the submissions to the trial judge and to us, there has been such reliance and emphasis on the content and timing of the documents filed and served in this case. It has to be accepted that the significance of those documents must have been particularly well understood by his Honour, as indeed emerges from the various passages from his reasons set out earlier in these reasons.
In so far as the wife claims to have been, in the language of her ground of appeal, an innocent party in these proceedings, it is important to recall that in [50] and [51], his Honour recognized that “she was largely a silent player in [the husband’s] manipulation of the family fortunes” and that “she was not an active participant in the misuse of [the sister’s] money”. Nevertheless, he concluded she was entitled to be “sceptical” of the husband’s claims and that “she was not entitled to contest the proceedings in the way that she did based on the documentary evidence that was placed before the Court”. Given the understanding of that documentary evidence, which his Honour as the trial judge must be taken to have had, we re-iterate that we would not be justified in interfering with his conclusions which caused him to make the costs order which he did against the wife.
It must also be remembered that in exercising his discretion to make the costs orders against the wife, his Honour had careful regard to her financial position and that he appreciated that her position was less advantageous than that of the sister, but nevertheless he was prepared to make the costs orders which he did.
As we have already indicated, there is no basis on which our interference with his Honour’s costs orders against the wife would be justified, and accordingly, the wife’s appeal against the orders must be dismissed.
Costs of the costs appeal
In the penultimate paragraph of the sister’s submissions to us, an order is sought that the wife should pay the sister’s costs of the costs appeal.
In its decision in Capoccello & Capoccello [2006] FamCA 300 (delivered 24 April 2006), which was also concerned, inter alia, with an appeal against a costs order made following property settlement proceedings, the Full Court (Finn, Coleman and Strickland JJ) said:
60.The Full Court of this Court often determines appeals against a costs order made in relation to property settlement proceedings on the basis of written submissions filed after the determination of an appeal against the property settlement order. It has not to date been the usual practice of the Full Court, so far as we are aware, to make an order in respect of the costs of the preparation of such submissions (be they from an ultimately successful appellant or respondent). In our view, such an approach on the part of the Full Court can be seen to reflect the general rule in the Court that each party should pay his or her own costs. Accordingly, we do not propose to make an order in relation to the husband’s appeal against the trial Judge’s costs order.
Notwithstanding the fact that in the present case the sister was a third party joined in proceedings under the Family Law Act, we see no reason in this case to depart from the approach referred to in Capoccello.
I certify that the preceding fifty one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Strickland and Austin JJ) delivered on 2 March 2016.
Associate:
Date: 2 March 2016
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