H, AW v K, S (No 2)
[2022] SASC 49
•18 May 2022
Supreme Court of South Australia
(Civil)
H, AW v K, S (No 2)
[2022] SASC 49
Judgment of the Honourable Auxiliary Justice Bochner
18 May 2022
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - GENERAL PRINCIPLES AND EXERCISE OF DISCRETION
Costs – effect of filed offer – claim and counterclaim dismissed.
Jurisdiction of Courts (Cross-vesting) Act 1987 (SA); Family Law Act 1975 (Cth), referred to.
Medway Oil & Storage Co Ltd v Continental Contractors Ltd [1929] AC 88; Badge Constructions Pty Ltd v Penbury Coast Pty Ltd [1999] SASC 6; Formosa v Eminent Forms Pty Ltd [2005] SASC 35; Coles v Wood [1981] 1 NSWLR 723; Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd & Ors (No 2) [2001] FCA 1861; Re Williams; Smith v Thwaites (No 2) [2017] VSC 771; Guo v Commonwealth of Australia (No 2) [2018] FCA 13; Manassen Holdings Pty Ltd & Anor v Commercial & General Corporation Pty Ltd (No 2) [2019] SASC 183; Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502; Rogers v Legal Services Commission of South Australia (1995) 64 SASR 572; Development Assessment Commission v Macag Holdings Pty Ltd [2001] SASC 189; Webuildem Pty Ltd v Arab Bank Australia Ltd [2013] FCA 37; Kowalski v Stanley & Partners & Anor [2014] SASC 198; Blair & Ors v Curran & Ors (1939) 62 CLR 464; Ekes v Commonwealth Bank of Australia [2014] NSWCA 336; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; Clayton v Bant [2020] HCA 44, considered.
H, AW v K, S (No 2)
[2022] SASC 49
On 11 November 2021, I delivered judgment whereby I dismissed both the applicant’s claim and the respondent’s counterclaim. Each party has now sought orders for costs in their favour.
The claim
In his claim, the applicant sought a declaration that the respondent held a sum of money on trust for him, and that he owned a motor vehicle which remained in her possession. In the alternative, he sought restitution of the monies. Initially, he also sought orders in respect of a number of other personal items, including jewellery. At trial, he did not press his claim in respect of these other items.
The applicant alleged that a Quistclose trust had been created, as a result of which the monies which he had transferred into the respondent’s bank account remained his. He said that the motor vehicle was his, and that the respondent was allowed to use it during their relationship. I concluded that both the monies and the motor vehicle were gifts to the respondent.
The counterclaim
By her cross claim, the respondent sought a declaration that she and the applicant were in a de facto relationship. She also alleged that the motor vehicle was a gift to her, and that the applicant was obliged to meet certain payments arising out of her early termination of the lease of a residential property. I concluded that the parties were not in a de facto relationship, and that the applicant was not obliged to make the payments in respect of the early termination of the lease. I did not deal with the respondent’s claim in respect of the motor vehicle as I had dealt with it as part of the claim.
The parties’ evidence
I found that neither party was an impressive witness. I found that the applicant was evasive and unhelpful and that his evidence contained inconsistencies, which caused me to doubt the truth of much of his evidence. I also found that he lied to the respondent on a number of occasions. I said:
I conclude that the applicant’s evidence was unreliable in many respects, and that he deliberately downplayed many aspects of the relationship to assist his claim. In other respects, his answers were evasive and calculated to obfuscate.
I also found that the applicant had deliberately sought to mislead the Court at the commencement of the action.
In respect of the respondent’s evidence, I said this:
I had considerable concerns about the respondent’s evidence. In my view, she lied on oath on a number of occasions, and this has led me to view her evidence with caution.
This included her evidence in respect of studying at university during the relationship, and the applicant’s proposal of marriage to her.
The respondent’s formal offer
On 11 November 2020, the respondent filed a formal offer with the Court. She offered to consent to judgment on the applicant’s claim on the basis that there be judgment for the applicant in the sum of $21,769.00, inclusive of interest, to be paid by the respondent and with the claim otherwise dismissed. On the counterclaim, she offered to consent to judgment on the basis that a declaration was made that she was the owner of the motor vehicle, with the counterclaim otherwise dismissed. She offered to submit to any order of the Court in respect of costs. An unsealed copy of the offer was served on the applicant’s solicitor on 10 November 2020, and a sealed version was served on 11 November 2020. The applicant made no response to the formal offer. Indeed, throughout the entire action, the applicant made no offer to settle the litigation, and declined to make any offer at mediation.
In respect of formal offers, the Uniform Civil Rules 2020 (“the UCR”) provide:
Division 2—Offers and responses
132.4—Formal offer
(1) A party (the offeror) may file a document making a formal offer to another party (the offeree) in the prescribed form to resolve a proceeding or any part of a proceeding (formal offer)—
(a) in terms of a judgment to be entered upon acceptance (a judgment offer); or
(b) in terms of a contract to come into existence upon acceptance including terms for the disposition of the proceeding (a contract offer).
Prescribed form—
Form 121 Formal Offer
(2) A formal offer must be served on each other party to the proceeding as soon as practicable after being filed.
(3) A formal offer may be expressed to be an open offer but, if silent, is made without prejudice save as to costs.
(4) A formal offer may include any term capable of being incorporated—
(a) in the case of a judgment offer—in a judgment; or
(b) in the case of a contract offer—in a contract.
(5) A formal offer—
(a) may include any term as to principal relief whether or not sought or obtainable in the proceeding;
(b) must include a term as to costs of the proceeding;
Examples—
That one party pay the costs of the proceeding of another party which may be on a specified basis or up to a specified date.
That one party pay the disbursements of another party which may be on a specified basis or up to a specified date.
That each party bear its own costs.
That the parties will submit to any costs order the Court may make.
(c) may include any term as to the offer lapsing if not accepted but if silent includes an imputed term that the offer remains open until withdrawn in accordance with rule 132.5; and
(d) if a contract offer involving payment of money—may include any term as to time for payment but if silent includes an imputed term that payment must be made within 28 days of acceptance.
(6) A formal offer may include or annex reasons why it would be unreasonable for the offer not to be accepted.
(7) A party may make multiple formal offers at the same time or over time.
…
132.6—Response to offer
(1) Unless an offeree accepts an offer under rule 132.7, an offeree must file a response to formal offer (a formal response) in the prescribed form within 14 days after service of a formal offer—
(a) not accepting the offer;
(b) contending that the offer does not comply with rule 132.4 and identifying why; or
(c) contending that the offeree requires a specified number of additional days to decide whether to accept the offer and identifying why.
Prescribed form—
Form 124 Response to Formal Offer
(2) A formal response must be served on each other party to the proceeding as soon as practicable after being filed.
(3) The making of a formal response that does not accept a formal offer does not prevent later acceptance of the offer by the offeree provided that the offer is still open for acceptance.
(4) Unless the Court otherwise orders, an offeree is not entitled on an application for costs under Division 4 to contend that an offer does not comply with rule 132.4 or did not give the offeree a reasonable time to decide whether to accept the offer other than on a ground identified in a formal response filed in compliance with this rule.
…
Division 4—Costs
132.10—Relevant offer not accepted
(1) In this rule—
relevant offer means a formal offer in compliance with rule 132.4 that—
(a) was filed and served on the offeree at least 21 days before the commencement of the trial or final hearing of the proceeding or such later date as the Court orders on an application made before the expiration of that period;
(b) was and remained open for acceptance at least 14 days after service;
(c) relates to an entire action and not merely to part of it;
(d) involves genuine compromise;
(e) contains a term that the respondent to the action is to pay the costs of the applicant on the standard costs basis up to acceptance of the offer or 14 days after service of the offer (whichever is earlier) or that the parties will submit to any order that the Court may make in the exercise of its discretion; and
(f) if it is a contract offer—
(i) provides that the consideration payable by one party to the other (disregarding costs) is the payment of money; and
(ii) if made by the party who is to pay the money—provides that the money is payable under the terms of the offer within 28 days after acceptance and the party is ready, willing and able to pay the money in accordance with the terms of the offer.
Note—
If the trial or final hearing is vacated or adjourned without being part heard, the original trial date is to be ignored for the purpose of subrule (1)(a).
…
(3) When—
(a) a relevant offer is made by a respondent in an action;
(b) the offer is not accepted by an applicant; and
(c) either—
(i) the respondent obtains judgment dismissing the action; or
(ii) the applicant obtains judgment that is less favourable to the applicant than the terms of the offer,
then—
(d) the costs incurred in respect of the action up to 14 days after service of the formal offer are unaffected by the making of the formal offer; and
(e) subject to the overriding discretion of the Court, the respondent is entitled to an order against the applicant for the respondent’s costs of the action to which the relevant offer relates thereafter on an indemnity basis.
(I have only set out the terms of the UCR in so far as they are relevant to the parties’ dispute on the question of costs.)
The costs of the respondent’s application to have the action transferred to the Family Court of Australia
On 6 March 2019, the respondent filed an application to have the action transferred to the Family Court of Australia pursuant to the Jurisdiction of Courts (Cross-vesting) Act 1987 (SA). Judgment dismissing this application was delivered on 3 May 2019. The costs in respect of it were referred to the Master, who reserved the question of costs to the trial judge.
The applicant submits that he should have the costs in respect of the application, on a standard costs basis, on the basis that costs should follow the event. The respondent consents to this order being made. I will make an order accordingly.
The costs of the action generally – the applicant’s position
The applicant says that the respondent should pay 40% of his costs of the claim and the cross claim, including reserved costs, on a standard costs basis. He contends that an order such as this will give a just result given that each was unsuccessful on their own claim. He makes the following arguments in respect of this submission.
The cross claim sought relief that was independent from the relief sought in the claim
The applicant says that, while he accepts that he is liable for the respondent’s costs on the claim, he is entitled to an order in his favour to the extent that the cross claim increased the time and costs involved in the action. In this regard, he relies on authorities such as Medway Oil & Storage Co Ltd v Continental Contractors Ltd, Badge Constructions Pty Ltd v Penbury Coast Pty Ltd and Formosa v Eminent Forms Pty Ltd.
The applicant submits that the cross claim was not in the nature of a defence to the claim. Through the cross claim, the respondent in fact sought primary relief in the nature of a declaration as to the existence of a de facto relationship. Consequently, he argues that the respondent should be liable for those costs incurred solely as a result of the cross claim.
In making this submission, the applicant says that while there was a degree of overlap between the claim and the cross claim, a substantial part of the trial dealt with the respondent’s claim that the parties were in a de facto relationship. Cross examination of neither party would have taken as long if this issue had not been raised; further, other witnesses would not have been required at all. In this regard, he argues that questions relating to the commencement of the relationship, their communications on topics other than money, and the public aspect of their relationship and their sexual relationship would have had no relevance; they related solely to the question of whether they were in a de facto relationship. He says that, but for the cross claim, IK, DFM, Mr R and Mr O would not have been called to give evidence.
The conduct of the respondent
The applicant submits that the conduct of the respondent contributed to the length of the trial, and as a result, should be taken into consideration when dealing with the question of costs. In this respect he says that her lies about her tertiary studies and the proposals of marriage led to lengthy cross examination.
The applicant further submits that the respondent wasted time and resources in the drafting of her trial affidavit, as it contained inadmissible material which caused significant time to be wasted by the applicant and the court in dealing with it. Further, her request to tender all of the text messages between the parties led to a significant wastage of time and resources.
The respondent’s formal offer is not a relevant offer for the purpose of the UCR
The applicant says that the terms of the respondent’s formal offer are less favourable than the judgment he obtained. This is because the offer was on the basis of a dismissal of the application for a declaration that the parties were in a de facto relationship, against a background of the respondent having commenced proceedings in the Family Court of Australia. It is the applicant’s position that acceptance of the formal offer, leading to dismissal of the application would not create a res judicata, as a result of which the respondent would be at liberty to continue her action in the Family Court. In making this submission, he relied on the case of Coles v Wood, where Moffitt P said:
The dismissal of an application for declaratory relief, as distinct from the making of a negative declaration, does not determine the right sought to be declared, so as to prevent it being litigated in other proceedings.
Further, the applicant argues that no issue estoppel would have been created by acceptance of the formal offer, because it would have been impossible to determine the basis on which the judgment had been granted. He relied on the decision of Kourakis J in Rasch Nominees Pty Ltd v Bartholomaeus in this regard. He further relied on Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd & Ors (No 2), where Goldberg J said:
The defence of issue estoppel raised different considerations. The fact that the judgment obtained was by consent is no bar to a claim that an issue estoppel arises out of the judgment so long as one can ascertain what are the issues which have been determined and disposed of by the judgment: In re South American and Mexican Company; Ex parte Bank of England [1895] 1 Ch 37 at 50; Isaacs v The Ocean Accident and Guarantee Corporation Ltd & Winslett [1958] SR (NSW) 69 at 75; Makhoul v Barnes (1995) 60 FCR 572 at 582. However, what is critical, in order to found an issue estoppel, is to be able to establish that an issue was involved in the consent judgment and was necessarily and conclusively determined by it.
…
Although the accessorial claim made against Mr Brookes required proof of a number of matters required to prove the claims made against Safeway and Mr Jones, such as the making of the agreements as alleged, the formulation of the policy by Mr Brookes as alleged, the purpose of the policy and Safeway’s substantial degree of market power in the wholesale bread market in 1994 and 1995, it does not follow that each of those issues was necessarily and conclusively determined by the consent judgment. The consent judgment was not given or entered on the basis of any particular finding of fact or conclusion of law. As the claims against Mr Brookes involved a number of elements, the absence of any of those elements could have led to a judgment in favour of Mr Brookes notwithstanding the existence of other elements.
Where a judgment is given in favour of an applicant or plaintiff, it is easier to determine the issues that are fundamental to the judgment than it is when a judgment is given in favour of a respondent or a defendant in respect of causes of action that require a number of elements to be established, the failure to prove any one of which will result in the claim being dismissed. In a multi‑element cause of action, a dismissal of the proceeding without reasons will not demonstrate which elements were not made out. The proposition is succinctly set out in Spencer Bower, Turner and Handley, (op cit) at 56‑57:
“A dismissal of an action which could succeed on establishing either x or y, is a decision negativing both, but if the action is found on x plus y, its dismissal does not necessarily involve a decision as to either, since the action may have failed because x had not been established, though y had been, or vice versa, or because neither had been established.”
… in order for an issue estoppel to arise in relation to a judgment dismissing a proceeding, one must be able to identify from the judgment itself, or the reasons for the judgment, the issues necessarily and conclusively determined in favour of the party in whose favour the proceeding was dismissed. If the cause of action was dismissed without reasons being given, and the causes of action were based on the need to prove a number of elements so that it is not able to be established which element was not proved in the dismissed proceeding, then no issue estoppel will arise in relation to any of the elements required to establish the causes of action in respect of which the proceeding was dismissed. To that extent the proposition in Spencer Bower, Turner and Handley, (par 1152 above) is good law.
In determining whether he had received a judgment more favourable than the formal offer, the applicant relied on decisions such as Re Williams; Smith v Thwaites (No 2), Guo v Commonwealth of Australia (No 2) and Manassen Holdings Pty Ltd & Anor v Commercial & General Corporation Pty Ltd (No 2).
In Re Williams, McMillan J said:
There is little by way of authority that specifically outlines how the Court must approach the task of determining whether the judgment is more favourable in accordance with r 26.08. In many cases there is a wide discrepancy between the offer and the judgment and it is relatively straightforward to determine which is more favourable. There is some authority relating to the determination of whether a judgment is more favourable in complex circumstances or where a non-monetary amount has been outlined in the offer, such as an apology in a defamation case. In those complex circumstances, it has been held that it is important to view the substance of the result, rather than any actual orders made.
(citations omitted)
In Guo, Jagot J said:
It may be accepted that, as the Commonwealth submitted, the question whether an applicant has obtained a judgment that is less favourable than the terms of the offer involves asking if the applicant “won anything of value or anything he could not have won without fighting the action through to a finish?” (Roache v News Group Newspapers Ltd [1992] TLR 551 applied in Timms v Clift [1998] 2 Qd R 100 at 107), and that this requires a comparison of the relief sought with a comparison of the relief granted (Metz Holdings Pty Ltd v Simmac Pty Ltd (No 3) [2011] FCA 1450 at [26]; Timms v Clift [1998] 2 Qd R 100 at 107).
In discussing the predecessor rules to the UCR in Manassen Holdings Pty Ltd, Doyle J said, in determining whether a formal offer was no less favourable than the judgment obtained:
In my view, r 188F(3) requires a holistic comparison that takes into account each of the components of the judgment and offer.
The applicant submits that, by proceeding to a trial and judgment, he obtained a finding that he and the respondent were not in a de facto relationship within the meaning of the Family Law Act 1975 (Cth) (“the Act”), as a result of which an issue estoppel was created, precluding the respondent from pursuing her action in the Family Court. As a result, he obtained at the trial a more favourable outcome than that offered to him by the formal offer.
Summary of the applicant’s position
The applicant submits that I should start with the principle set out in Medway, and then, based on the respondent’s conduct, and the fact that her formal offer was not a relevant offer, wield a broad axe to make one order in respect of costs that does justice to both parties. In making this assessment, I should consider the respective size of the claim and the cross claim, and the extent to which the cross claim brought in issues that were not raised by the claim. I should also assess the extent to which the conduct of the respondent, in lying to the Court, including clearly inadmissible material in her trial affidavit, and seeking to tender all of the text messages, increased the time and resources required to dispose of the matter at trial. Finally, in determining whether the respondent’s formal offer had a role to play in determining the question of costs, I must compare the judgment obtained at trial, with that offered by the formal offer. If the applicant obtained something at trial that he would not have received had he accepted the formal offer, then the formal offer is less favourable than the judgment. In this case, the judgment obtained by the applicant on the cross claim would prevent the respondent from pursuing any further action in the Family Court; thus, the formal offer was less favourable as it did not give this result. Once all of these factors are weighed up, the just result is that the respondent pay 40% of the applicant’s costs of the cross claim.
The respondent’s position
The respondent’s primary submissions on the question of costs
The respondent contends that she is entitled to her costs on the standard costs basis from 7 February 2019 to 25 November 2020, except in respect of FDN 19 and FDN 30; otherwise, from 25 November 2020, she is entitled to her costs on an indemnity basis. I have addressed the costs of FDN 19 at [11]-[12]. The costs of FDN 30 were dealt with on 13 August 2020, and the respondent does not seek to disturb the orders made on that day.
The respondent says that she is entitled to the costs incurred after 25 November 2020, 14 days after service of the formal offer, by virtue of the operation of r 132.10(3) of the UCR.
The respondent contends that her formal offer constituted a relevant offer within the meaning of the UCR, and there is no basis on which the Court should exercise its discretion to depart from the rule entitling her to her costs on an indemnity basis fourteen days after its service. Indeed, the respondent submits that the conduct of the applicant in his prosecution of the action warrants the making of the order for indemnity costs as envisaged by the UCR. In particular, she points to the failure of the applicant to make any attempt to settle the action prior to trial, failing to disclose the true nature of the parties’ relationship when the action was first commenced, and failing to comply with the overarching obligations of parties set out in r 3.1 of the UCR. She also contends that the Court should take into account the failure of the applicant to comply with any of the pre‑action steps required by the Supreme Court Civil Rules 2006, which were in operation at the time that the action was commenced.
The respondent submits that the applicant is precluded from arguing that the formal offer is not a relevant offer within the meaning of the UCR. This submission is made on the basis of UCR 132.6(4), which provides that, where a party does not file a formal response to a formal offer, or does not raise in a formal response non‑compliance with UCR132.4, that party is precluded from later contending that the offer does not comply with UCR 132.4. The respondent says that this is the first time that the applicant has raised the question that the formal offer is not a relevant offer; thus, he is precluded from making this submission. She further submits that he is precluded from relying on his submissions in respect of res judicata and issue estoppel, because he failed to file a formal response to her formal offer.
The respondent submits that the applicant should be bound by the consequences of his decision not to make any offers, or to respond to her formal offer. This should be reflected in the costs outcome.
The respondent acknowledges that it is within my discretion to make a global order in respect of costs, rather than separate orders in relation to the claim and counterclaim. She urged, however, that even if this approach is taken, the orders made should reflect the provisions of the UCR.
Was the judgment “no less favourable” to the applicant than the formal offer?
In respect of the applicant’s contention that the judgment was less favourable to him than the formal offer, the respondent submits that the formal offer must be assessed by reference to the relief sought in the pleadings. As a result, the Family Court proceeding need not be taken into account in determining whether the judgment was more or less favourable. In any event, the respondent contends that the declaration sought in this matter is the same relief sought in the Family Court.
The respondent offered to settle all of the claims between the parties; that is, the claim and the cross claim. As the applicant was not seeking a negative declaration, but only sought to have the respondent’s cross claim dismissed, a judgment giving him this result would result in an issue estoppel, which would prevent her from continuing her action in the Family Court.
The respondent seeks to distinguish Coles v Wood, on the basis that the circumstances of that matter were far removed from the circumstances here. She also seeks to distinguish the decision in Rasch, on the basis that the defendant seeking to claim that a res judicata had been created was not the same defendant in relation to whom the consent judgment dismissing the claim had been entered.
In support of her submission that an issue estoppel or res judicata would have been created by a consent judgment dismissing her claim for a declaration, the respondent relies on the case of Chamberlain v Deputy Commissioner of Taxation, where the Court said:
The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment, especially where it is the defendant who wishes to bring action at a later date: Isaacs v. Ocean Accident and Guarantee Corporation Ltd. (24), per Street C.J. and Roper C.J. in Eq.: cf. Owen J. (25). But the principle of res judicata holds good in such a case.
In Chamberlain, the Court focused on the cause of action relied upon in respect of which a consent judgment had been entered. When that approach is taken in this matter, it is clear that the cause of action which was dismissed is the same cause of action which the respondent has raised in the Family Court proceeding. As a result, a res judicata would have been created in respect of that cause of action, had the applicant accepted the respondent’s formal offer.
The respondent relies on a number of other authorities which similarly find that a consent judgment can give rise to an issue estoppel or a res judicata. In particular, she drew my attention to the case of Rogers v Legal Services Commission of South Australia, where Lander J said:
In considering the plea of res judicata the question that must be determined is whether the cause of action which is raised in the second proceedings has already merged into the judgment in the first proceedings: Chamberlain v Deputy Commissioner of Taxation (at 274), per Deane, Toohey and Gaudron JJ.
In the ordinary course of events where a trial has taken place and a judgment entered, it is not difficult to determine whether the cause of action, the subject matter of a current set of proceedings, has been previously disposed of by a tribunal in circumstances which would give rise to a plea of res judicata.
More difficulty arises in circumstances where the matter has not gone to trial and has not been formally adjudicated upon by a tribunal for reasons that there has been a withdrawal by one party before the matter has concluded, or the parties have agreed to a compromise, or judgment has been entered by reason of the default of another party, or because the action has simply been dismissed.
He went on to say:
There are circumstances where a plea of res judicata will be good, even though there has been no investigation of the merits of the matter by the tribunal. In cases where consent orders or judgments are entered, notwithstanding that the court has been relieved of the obligation of carrying out the investigation, that consent judgment will operate as a bar to subsequent proceedings based upon the same subject matter…
Finally, the respondent submits that, in any event, an attempt to continue the Family Court proceedings in the event that the applicant had accepted her formal offer would have amounted to an abuse of process. In this regard, she relies on the case of Development Assessment Commission v Macag Holdings Pty Ltd. In that case, Doyle CJ said:
The undesirability of repeated applications in relation to the one matter is self evident. The relitigation of an issue already decided is not in the public interest, nor is it fair to the respondent to the application. As Mason CJ, Deane and Dawson JJ said in Walton v Gardiner (1993) 177 CLR 378 (at 392-393):
“The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness. … Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.” (footnotes omitted)
On this basis, the respondent says that it is appropriate for her to have an order for costs in her favour, on an indemnity basis after 25 November 2020, as her formal offer was in fact more favourable to the applicant than the judgment that he received. Otherwise, the applicant should pay her costs on the standard costs basis.
Consideration
In the ordinary course, costs would follow the event. The effect of this is that the respondent would be entitled to an order that the applicant pay her costs in respect of the claim, and the applicant would be entitled to an order that the respondent pay his costs in respect of the cross claim. I see no reason to depart from the principles set out in Medway Oil, in determining the entitlement of costs between the parties. The House of Lords, in that case, adopted the approach of the trial judge:
The direction given by MacKinnon J was in effect that when, as here, the defendant has succeeded in his defence but failed in his counterclaim he is entitled to the costs which he has actually and properly incurred in defeating the claim (including in this case the costs of the issues mentioned), but is not entitled to any costs which he would not have incurred had he not counterclaimed. The plaintiffs are only entitled to such costs as they would not have incurred had they not been compelled to meet the counterclaim.
Lord Blanesburgh gave the following guidance in making the assessment as to the costs that arose as a result of the claim and those that arose as a result of the counterclaim:
… in determining for the purposes of a taxation ins such a case as this whether a particular is an issue on the claim or on the counterclaim or on both the claim and the counterclaim, the Taxing Master is not by any rule in Saner v Bilton to be enslaved by the form of the pleadings. The question must be determined as one of substance and not of form – the manner in which the action was fought and in which the issues were dealt with by the parties and the Court not being disregarded.
It is necessary, therefore, that I determine which issues arose as a result of the claim and its defence, and which ones arose independently of the claim, and only as a result of the cross claim. Once I have determined this question, I will address whether the issues raised solely by the cross claim led to the applicant’s incurring costs that he would not otherwise have incurred. I will then consider the following questions raised by the parties’ submissions:
1. Is the applicant precluded from making submissions in respect of whether the formal offer is a relevant offer, and relying on res judicata and issue estoppel as bases for contending that the formal offer was less favourable than the judgment received?
Is the judgment more or less favourable to the applicant than the formal offer?
3. Should the costs entitlement of the parties be adjusted as a result of discretionary factors, such as their conduct?
Which issues arose as a result of the claim and its defence, and which issues (if any) arose only as a consequence of the cross claim?
The issues raised by the applicant on the claim were broad and wide ranging. They covered questions relating to gifts, special purpose trusts, unjust enrichment, and restitutionary relief. The respondent’s defence covered issues such as estoppel, unconscionable conduct and the law of gift.
In determining whether the motor vehicle and the money were gifts, I was required to undertake a wholesale examination of the relationship between the parties. Because of the elements which the respondent was required to prove to establish that they were gifts, I was required to analyse the words that the parties used in their text message correspondence, and to undertake a careful review of their interactions with each other. I was required to do this for the entirety of their relationship, because of the ongoing transfers of money throughout the relationship, as well as the fact that he gave her not one but two motor vehicles over its course. In the course of my consideration, I took into account text messages and other correspondence throughout the entirety of their relationship, as well as their oral and affidavit evidence.
In determining whether a Quistclose trust had been created, I was required to examine in detail the words that the parties used in communicating with each other. The text messages between the parties, and other correspondence that the applicant wrote to the respondent were the key to determining whether the applicant made out this claim.
The respondent’s cross claim for a declaration in respect of the motor vehicle overlapped entirely with the applicant’s claim for its return. It raised no issues that were not raised in the claim.
The respondent’s cross claim that the parties were in a de facto relationship clearly raised issues that were broader than those raised in the claim. I do not, however, consider that it significantly increased the length of the trial or required the consideration of significantly more evidence than the issues raised in the claim.
The history of the parties’ relationship was relevant to the applicant’s claims; it was not adduced merely for the purpose of determining whether they were in a de facto relationship. It was necessary to review all aspects of their relationship to determine whether any of the applicant’s claims were made out; whether the money given over a relatively lengthy period of time and the car were gifts was entirely dependent on the context in which they were given to the respondent. This context was only determined by a close examination of the parties’ relationship, including their communications with each other from its commencement through to its demise. I consider that Mr O and Mr R provided little, if any, relevant evidence; their evidence, however, occupied a very small period of time and did not add extensively to the length of the trial. Nor did the evidence of IK and DFM.
It is true that each party was questioned extensively about the nature of their relationship. As I have already said, however, I consider that the applicant’s claims required a close investigation of the nature of the relationship between the parties; thus, I decline to conclude that the respondent’s cross claim added significantly to the length of the trial, or led to the consideration of issues that would not have been considered otherwise.
Because of the broad issues raised by the applicant’s claim, I do not consider that there should be any reduction in the costs to which the respondent is entitled because of the failure of the cross claim. The cross claim in respect of the motor vehicle was defensive to the applicant’s claim. The cross claim in respect of the existence of a de facto relationship did not lead to a greater examination of the parties’ relationship than that required by the claim.
Is the applicant precluded from making submissions in respect of whether the formal offer is a relevant offer, and relying on res judicata and issue estoppel as bases for contending that the formal offer was less favourable than the judgment received?
This question can be dealt with shortly. In my view, the submissions of both parties are misconceived.
Formal offers are described in UCR 132.4. A formal offer is a filed document in the prescribed form which contains an offer to resolve a proceeding or part of a proceeding. It must be served on all other parties as soon as practicable after being filed and must contain a term dealing with the costs of the action. Otherwise, UCR 132.4 is not particularly prescriptive as to the terms that a formal offer must contain.
A relevant offer is a formal offer that contains certain specific features prescribed in UCR 132.10(1). Not all formal offers are relevant offers; all relevant offers must also be formal offers. A relevant offer which is a judgment offer, such as that filed by the respondent (rather than a contract offer) must:
• be filed and served at least twenty-one days before the commencement of the trial of the action;
• remain open for acceptance for at least fourteen days after service;
• relate to the entirety of the action;
• involve a genuine compromise; and
• make an offer in respect of costs on one of two specified bases, one of those being that the parties will submit to any order that the Court may make in the exercise of its discretion.
The respondent’s formal offer is both a formal offer and a relevant offer. It:
• was filed in the prescribed form;
• offered to settle the entirety of the claim and the cross claim;
• offered to submit to any order made by the Court in its discretion on the question of costs;
• was filed on 11 November 2020, with an unsealed copy of the document served by the respondent’s solicitor on 10 November 2020 and a copy of the sealed document served on 11 November 2020. This is well before twenty‑one days before the commencement of the trial. Further, it was not, at any point, withdrawn by the respondent; as a result, it remained open for acceptance for well in excess of fourteen days.
These elements mean that it complies with both UCR 132.4 and UCR 132.10(1).
It is only when the Court considers the effect of failure to accept a relevant offer, that the question of whether the offer was more or less favourable than the judgment becomes a factor to take into consideration. Thus, whether the formal offer was more or less favourable to the applicant does not determine whether the offer is a relevant offer or a formal offer. It determines whether the respondent can seek to invoke the costs consequences set out in UCR 132.10(3).
While the applicant has misconceived the framework of his argument in respect of the form of the formal offer, he does not seek to contend that the formal offer does not comply with UCR132.4(1), and so does not amount to a relevant offer. Rather, he contends that it does not give rise to the sanctions set out in UCR132.10(3), because the judgment was not less favourable to him than the formal offer. As a result, there is no prohibition on the respondent’s making any submissions that he considers appropriate in respect of the formal offer.
Is the judgment more or less favourable to the applicant than the formal offer?
There can be no doubt that, in respect of the claim, the formal offer was more favourable to the applicant than the judgment. If he had accepted the formal offer, he would have received a judgment in his favour, and a payment of $21,769.00. The judgment dismissed his claim. On this basis, he is prima facie liable to pay the respondent’s costs in respect of the claim, on the standard costs basis until 25 November 2020, and thereafter, on an indemnity basis.
The more difficult question is whether, in respect of the cross claim, the formal offer was less favourable to the applicant than the judgment. The causes of action relied on by the respondent were:
(a) Statutory right to a declaration pursuant to s 90RD(1) of the Act that the parties were in a de facto relationship within the meaning of s 4AA of the Act.
(b) Equitable estoppel
(c) Unconscionable conduct.
The remedies sought by the respondent were:
1. A declaration with respect to the existence of a de facto relationship between the parties;
A declaration that the respondent owned the motor vehicle;
3. Equitable relief in respect of outstanding payments of rent and other expenses associated with the North Adelaide property; and
Damages.
The judgment that she offered to consent to was for a declaration in respect of the motor vehicle, and for the balance of her claims to be dismissed. I note that the judgment that she received dismissed her claim in its entirety. It is important to note, however, that her claim in respect of the motor vehicle was dealt with by way of her defence to the applicant’s claim, wherein he sought the return of the motor vehicle. I found that the motor vehicle was an unconditional gift to the respondent, as a result of which, it was hers absolutely. As a result, I consider that the fact that she did not receive a declaration in respect of the motor vehicle is neither here nor there; the outcome is the same. In effect, therefore, on the cross claim, it could be said that she succeeded in respect of the motor vehicle, and that her cross claim was otherwise dismissed. Importantly, her claim in respect of the existence of a de facto relationship was dismissed.
The question remains, therefore, whether a judgment by consent dismissing her de facto relationship claim has the same effect as a judgment dismissing that claim after a contested trial.
It is the applicant’s case that he did receive something of value that he would not have received without a trial – a judgment which barred the respondent from continuing with a claim in the Family Court.
In my view, the authorities clearly support the conclusion that a consent judgment dismissing the respondent’s claim would have created a res judicata that would have operated as a bar to her pursuing the Family Law action.
Chamberlain makes this clear:
The point of the present appeal is that the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it is not competent for the respondent to bring further proceedings in respect of the same cause of action. It is no answer to say that the Court might, if appropriate, stay the second action as an abuse of process. The impediment goes deeper than that; res judicata may sustain a plea of abuse of process but in that case the appropriate remedy is to strike out the later action: Greenhalgh v. Mallard; Dallal v Bank Mellat. So long as the respondent chooses, as he does, to take no step to set aside the judgment and to raise no issue in the second action as to the circumstances in which that judgment was obtained, he must accept the consequences of res judicata. There is nothing in the Act or arising from the position of the respondent as a public officer that precludes the operation of that doctrine. The matter is not one for the discretion of the Court; by operation of law the cause of action relied upon by the respondent has ceased to exist.
(citations omitted)
In Webuildem Pty Ltd v Arab Bank Australia Limited, the Federal Court considered an application by the respondent to have the applicant’s proceeding summarily dismissed, or, alternatively, struck out as an abuse of process. Foster J said this:
Subsequently, in the events which happened, the settlement agreement was perfected by the making and entry of the 16 July 2012 orders. The parties’ respective rights sought to be vindicated by them in the Supreme Court proceedings merged in the judgment and orders specified in the 16 July 2012 orders. At that point, those rights had lost their independent existence (Chamberlain v Deputy Commissioner of Taxation 164 CLR 502 at 508 per Deane, Toohey and Gaudron JJ).
The judgment and orders entered by means of the 16 July 2012 orders constitute a decision pronounced by the Supreme Court by consent, being a court which plainly had jurisdiction over the causes of action and the parties in the Supreme Court proceedings, which disposed once and for all of the fundamental matters decided by the entry of those orders so that, except on appeal, those matters cannot be re-litigated between Webuildem and the other defendants, on the one hand, and the bank, on the other hand. The 16 July 2012 orders constitute a res judicata as between the bank and the defendants. (See Chapter 1 of Spencer, Bower and Handley, Res Judicata, (4th edn, LexisNexis, 2009); Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J; and Blair v Curran (1939) 62 CLR 464 at 531–532 per Dixon J.)
It does not matter that the 16 July 2012 orders were made and entered by consent without any prior judicial determination of the relevant issues on the merits. The principle of res judicata holds good in respect of judgments by consent (Chamberlain v Deputy Commissioner of Taxation 164 CLR 502 at 508 per Deane, Toohey and Gaudron JJ; and Isaacs v Ocean Accident & Guarantee Corporation Ltd 58 SR (NSW) 69 at 75 per Street CJ and Roper CJ in Eq).
Similar decisions have been reached in respect of judgments entered by consent in cases such as Kowalski v Stanley & Partners & Anor and Rogers v Legal Services Commission of South Australia.
It is clear from these decisions that a res judicata will arise as a result of consent judgment. This leads to the conclusion that, had the applicant accepted the respondent’s formal offer, a res judicata would have been created, which would operate as a defence in the event that the respondent sought to continue her action in the Family Court. Coles v Wood is distinguishable because of the very different nature of its circumstances, involving an application for declarations in respect of fully executed search warrants. Rasch Nominees Pty Ltd v Bartholomaeus is also distinguishable, as the decision is based on the question of privity of interest.
Having reached this conclusion, there is no need to consider whether an issue estoppel would have arisen if the applicant had accepted the formal offer. Indeed, the submissions of the parties failed to distinguish, in any useful way, the difference between res judicata and issue estoppel, in that there was no real articulation of the issue that might give rise to an estoppel, as distinct from the cause of action which gave rise to a res judicata. I will, however, deal briefly with the question of issue estoppel for completeness.
The difference between res judicata and issue estoppel was explained by the High Court in Blair & Ors v Curran & Ors. Dixon J said:
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J. in R. v. Inhabitants of the Township of Hartington Middle Quarter (1), the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.
The cause of action claimed by the respondent (a declaration pursuant to s 90RD(1) of the Act that the parties were in a de facto relationship within the meaning of s 4AA of the Act) would have merged so that it no longer had an independent existence from the judgment.
It is also arguable that, on acceptance of the formal offer, the state of fact alleged by the respondent, that the parties were in a de facto relationship, was decided by the consent judgment in the negative.
In Ekes v Commonwealth Bank of Australia, Bathurst CJ said this in respect of the creation of an issue estoppel:
The principles which determine whether an issue estoppel arises are well established although their application can cause difficulty. For an issue estoppel to arise it is necessary that it be established that the same question arises, that the judicial decision said to create the estoppel was final and that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 at 935 and Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363 at [21].
It was accepted correctly by the parties that a consent judgment could give rise to an issue estoppel: Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 (Chamberlain) (although that was a case of res judicata or cause of action estoppel), Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 (Habib) at [186] and Makhoul v Barnes (1995) 60 FCR 572 at 582.
An issue estoppel will only arise in respect of those matters which a primary decree, order or judgment necessarily established as the legal foundation for the decision and nothing but that which is legally indispensable to the conclusion is thus finally closed or precluded: Blair at 531-532. In the case of a judgment by consent this may be productive of some difficulty: Chamberlain at 508 and Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1958) SR (NSW) 69 (Isaacs) at 75. As was pointed out in the latter case, a court will examine all evidence that is available and admissible and with the aid of such material ascertain any and what adjudication of matters in dispute was expressly or necessarily involved in the actual decision assented to.
…
In the present case the company had sought interlocutory relief restraining the receivers and managers appointed by the respondent from performing their function. Undertakings were given conditional upon compliance with any order for security. The company was unable or unwilling to comply with the conditions or to provide additional security for costs. In those circumstances, it agreed to the release of the undertakings and the Dismissal.
In that context as Brightman LJ put it in Khan v Golechha International Ltd [1980] 1 WLR 1482 the issue raised in the proceedings was put to rest. A final hearing had been set down for 13 and 14 April 2010. The company, by declining to provide the security and consenting to the Dismissal, effectively abandoned any claims based on the extension of the loan repayment date. In the circumstances, the company would be estopped from raising against the respondent any claim based on an extension of that date.
Similarly, I am of the view that acceptance of the formal offer consenting to the dismissal of the respondent’s cross claim would have given rise to a conclusion that the parties were not in a de facto relationship. By consenting to the dismissal of her cross claim, the respondent effectively abandoned any claim based on her contention that the parties were in a de facto relationship and would be estopped in the future from pursuing this claim in the Family Court.
Res judicata and issue estoppel were examined by the High Court in two recent decisions. In Tomlinson v Ramsey Food Processing Pty Ltd, the High Court considered a situation where an abattoir (Ramsey) employed its workers through a labour hire company. The Fair Work Ombudsman brought an action against Ramsey in the Federal Court, in respect of various breaches of the Fair Work Act 2009 (Cth) and the relevant awards made under the Workplace Relations Act 1996 (Cth). It contended that Ramsey was the employer of the workers and that the interposition of the labour hire company was a sham. The Federal Court upheld this contention.
Subsequently, one of the workers brought a claim against Ramsey in the District Court of New South Wales, seeking damages for personal injury that he suffered while working at the abattoir, and which he said had occurred as a result of Ramsey’s negligence. He alleged that he was, in fact, employed by the labour hire company rather than Ramsey; if Ramsey was found to be his employer, he would have been prevented from seeking damages from Ramsey as a result of New South Wales legislation. Ramsey argued that the worker was estopped from denying that Ramsey was his employer as a result of the Federal Court decision. The plurality said this:
Three forms of estoppel have now been recognised by the common law of Australia as having the potential to result from the rendering of a final judgment in an adversarial proceeding. The first is sometimes referred to as “cause of action estoppel”. Estoppel in that form operates to preclude assertion in a subsequent proceeding of a claim to a right or obligation which was asserted in the proceeding and which was determined by the judgment. It is largely redundant where the final judgment was rendered in the exercise of judicial power, and where res judicata in the strict sense therefore applies to result in the merger of the right or obligation in the judgment. The second form of estoppel is almost always now referred to as “issue estoppel”. Estoppel in that form operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment. The classic expression of the primary consequence of its operation is that a “judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies”. The third form of estoppel is now most often referred to as “Anshun estoppel”, although it is still sometimes referred to as the “extended principle” in Henderson v Henderson. …
(citations omitted)
Thus, res judicata results in the disposal of an entire cause of action. Issue estoppel, on the other hand relates to the disposal of an issue of fact or law which was determinative, in whole or in part, of the action. The decision turned on whether the worker was privy in interest with the Fair Work Ombudsman, and so is not analogous to the question before me. However, the Court also considered the relationship between the doctrine of estoppel and that of abuse of process and said the following:
The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding.
Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel.
(citations omitted)
The second case is Clayton v Bant. In that case, a husband contended that a ruling made by the Personal Status Court of Dubai precluded his wife from bringing a claim seeking a property settlement and spousal maintenance pursuant to the Family Law Act 1975 (Cth). He sought to rely on cause of action estoppel and Anshun estoppel (the latter clearly not relevant here). Edelman J had this to say about res judicata, cause of action estoppel and issue estoppel:
Merger or res judicata in the strict sense
First, where a cause of action, or “the very right ... claimed”, has previously been established by a local court then at common law the “merger of the right or obligation in the judgment” can be relied upon to preclude re-assertion of the extinguished right. The doctrine of merger is not merely based upon principles of finality. It exists because when a court order “replicates” the prior right, with added consequences such as enforcement mechanisms, the prior right “has no longer an independent existence”. No action can be brought upon that extinguished right. The successful plaintiff's only right is a right on the local judgment, which is “of a higher nature”. Since the expression “res judicata” has also been loosely used to describe all four rules discussed below, each of which is underpinned by a policy of finality, the effect of the doctrine of merger is sometimes described as “res judicata in the strict sense”.
Cause of action or claim estoppel
Secondly, if the judgment finally resolved a conflict about the existence or extent of a “cause of action” then the parties to that proceeding, or their privies, will be precluded from relitigating that cause of action. This rule is independent of the doctrine of merger because even if the rights adjudicated upon were determined not to exist in the earlier proceeding, so that there was nothing to merge into the judgment, "the unsuccessful plaintiff can no longer assert" that a right exists. The Full Court of the Family Court of Australia in this proceeding described the rule as "res judicata estoppel". In Australia, it is usually described as “cause of action estoppel”. But, as has been pointed out on a number of occasions, the expression “cause of action” is imprecise and might extend either to the legal right claimed or to the facts that the plaintiff must establish for their claim.
The best approach is to recognise that both the legal right claimed and decided and the pleaded or asserted facts are relevant: “cause of action normally means a right alleged to flow from the facts pleaded”. The focus is upon the whole claim, including the right and the essential facts upon which the right depends. But much can depend upon the level of generality at which the claim is characterised. As Gummow J said in Trawl Industries of Australia Pty Ltd (In liq) v Effem Foods Pty Ltd, characterisation must proceed by reference to substance rather than form. Regard can be had to the pleadings, the evidence, and the reasons for decision.
Issue estoppel
Thirdly, if a necessary legal foundation for the judgment is the resolution of an ultimate issue of fact or law then the parties or their privies are precluded from alleging or denying a state of fact or law that is inconsistent with that resolution. This rule is well known by the description “issue estoppel”, which was first coined by Higgins J. The same issues of characterisation arise in respect of an issue for issue estoppel as arise in respect of a claim for cause of action or claim estoppel.
These cases make it clear that, in order to determine if issue estoppel arises, it is necessary to identify the issue of fact or law which was necessarily resolved by the consent judgment. The issue in this case must be whether a de facto relationship existed between the parties.
In my view, the problem identified by Goldberg J in Australian Safeway Stores, and quoted at [20] hereof, that no issue estoppel will be created if one is not able to identify the issues conclusively determined by the consent judgment does not arise here. This is because, while s 4AA of the Family Law Act sets out a number of criteria to be taken into consideration when determining whether or not a de facto relationship exists, none of these criteria is an essential requirement; indeed, s 4AA(3) specifically provides:
No particular finding in relation to any circumstances is to be regarded as necessary in deciding whether the persons have a de facto relationship.
The existence of a de facto relationship is not a multi-element cause of action, such as negligence or breach of contract, where all of the necessary elements must be proven. Thus, if the claim was in negligence, it could be dismissed because no duty of care was established or because causation was not established or there was no loss. A consent judgment dismissing the claim would not establish which element was not proven; thus an issue estoppel in relation to the existence of a duty of care, for example, would not arise. When a claim in negligence is dismissed without consideration of the merits of the claim, it cannot be ascertained which elements were not established.
The existence of a de facto relationship is a state of fact, the existence of which does not depend on the proof any specific element or criteria. Thus dismissal of the claim of the existence of a de facto relationship would give rise to an issue estoppel in respect of its existence.
In addition to the creation of both a res judicata and an issue estoppel, I am of the view that, had the applicant accepted the respondent’s formal offer, any pursuit by the respondent of her action in the Family Court would have amounted to an abuse of process. I consider that it would offend against the principles of finality and fairness to allow the respondent to pursue her action in the Family Court after consenting to the dismissal of her claim for a declaration that the parties were in a de facto relationship in this Court.
On this basis, I conclude that the formal offer was more favourable to the applicant than the judgment that he received. The respondent is entitled to her costs on an indemnity basis from fourteen days after the service of her formal offer on the applicant.
Should the costs entitlement of the parties be adjusted as a result of discretionary factors, such as their conduct?
I do not consider that the respondent’s costs entitlement should be reduced as a result of any discretionary factors. While I found that the respondent had been untruthful in a number of respects, I also found that the applicant had been untruthful and I described his evidence as unhelpful and evasive.
While the respondent sought to tender all of the text messages between the parties, this issue took up very little time. I reject the applicant’s contention that this increased his preparation time and costs; the text messages were clearly discoverable, and both parties referred to a substantial number of them in the prosecution of their cases. While the respondent’s affidavit of evidence in chief contained inadmissible material, this took up very little time at trial.
I note that the respondent submitted that the applicant should suffer a costs penalty for his failure to make any attempt to resolve the matter prior to trial, including refusing to make any offer at mediation and failing to respond in any way to the formal offer. It is, in my view, most regrettable that the applicant made no attempt to resolve this matter without a trial. Such an attitude shows a disdain for UCR 3.1(1) and the objects of its predecessor Supreme Court Civil Rules 2006, set out in Rule 3.
It also demonstrates a lack of proportionality between the costs associated with the trial of the claim and cross claim, and the value of the claim and the cross claim themselves. Nonetheless, I do not consider that a further cost penalty is warranted. The applicant’s failure to obtain a result not less favourable than the formal offer has led to an award of indemnity costs in favour of the respondent from fourteen days after its service.
Conclusion
The respondent is entitled to her costs in respect of the claim and the cross claim on the standard costs basis from 7 February 2019 to 25 November 2020, and from 25 November 2020, she is entitled to her costs on an indemnity basis.
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