Hijazi and Hijazi and Ors (No 2)
[2016] FamCA 906
•28 October 2016
FAMILY COURT OF AUSTRALIA
| HIJAZI & HIJAZI AND ORS (NO 2) | [2016] FamCA 906 |
| FAMILY LAW – COSTS |
| Family Law Act 1975 (Cth) |
| B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113 Hendy & Deputy Child Support Registrar and Anor [2001] FamCA 632; (2001) 27 Fam LR 641 |
| APPLICANT WIFE: | Ms Hijazi |
| RESPONDENT HUSBAND: | Mr Hijazi |
| 2ND RESPONDENT | B Pty Ltd |
| 3RD RESPONDENT | C Pty Ltd |
| FILE NUMBER: | MLC | 11158 | of | 2015 |
| DATE DELIVERED: | 28 October 2016 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | By Way Of Written Submissions |
SUBMISSIONS RECEIVED FROM
| SOLICITOR FOR THE APPLICANT WIFE: | Ferdinand Zito & Associates |
| SOLICITOR FOR THE RESPONDENT HUSBAND: | Schembri & Co Lawyers |
| SOLICITOR FOR THE 2ND RESPONDENT: | JHK Legal |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr A T Schlicht |
Orders
That the application for costs filed by B Pty Ltd and C Pty Ltd are each dismissed.
The application for a costs order (reserving the costs) sought by the husband is adjourned to a date to be fixed. If the husband does not file a further submission by 4 pm on 11 November 2016 to which the wife has a right of reply by 4 pm on 18 November, his application for the reservation of costs stands dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hijazi & Hijazi and Ors (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 11158 of 2015
| Ms Hijazi |
Applicant Wife
And
| Mr Hijazi |
Respondent Husband
And
B Pty Ltd
2nd Respondent
And
C Pty Ltd
3rd Respondent
REASONS FOR JUDGMENT
C PTY LTD and B PTY LTD seek orders for costs against Ms Hijazi (“the wife”) arising out of orders made on 23 September 2016. The other respondent to the proceedings, Mr Hijazi (“the husband”) filed a written submission that the order that the Court should make in relation to him was that (as between he and the wife), his costs be reserved to the trial.
For the reasons that follow, there is not a sufficient basis for the Court to make any orders for costs in favour of the two entities and I am not prepared to make the order sought by the husband.
Background
The wife filed an application seeking to join C PTY LTD and B PTY LTD to the substantive proceedings in which she seeks to set aside a financial agreement with the husband. At the interlocutory stage before me, she sought orders of the nature of anti-suit injunctions. I declined to make the order sought.
C PTY LTD had begun proceedings against the husband and the wife in the Supreme Court of Victoria arising out of a mortgage that encumbered the parties’ former home in which the wife currently resides. At the time of the hearing before me, the period for filing a defence had not expired but there was no indication that the husband intended to do so. The wife’s position remained unclear. Be that as it may, the wife was seeking an anti-suit injunction to preclude the continuation of those proceedings.
B Pty Ltd had already prosecuted and completed proceedings in the Magistrates’ Court of Victoria against the wife on an undefended basis and had orders against her. Albeit the proceedings were not defended by the wife, the ultimate orders of that court seemed to have been glossed over by both husband and wife in relation to what they were really all about. The issue was a motor car driven by the wife said to be owned by B Pty Ltd. Whilst the proceedings in the Magistrates Court may have been about the recovery of that car, the orders did not so provide. The wife’s application against this entity was in effect to restrain enforcement of the orders made by the Magistrates’ Court. I also declined to make that order sought by the wife.
The husband sought orders himself against the wife wanting her to return to the second named entity the motor vehicle. The husband’s application was not really pressed nor could it be as the Magistrates Court had made a money obligation order against the wife. Accordingly, I did not make any of the orders the husband sought.
It is unnecessary for me to set out any further factual details; they can be read in the reasons for judgment.
In respect of the various costs applications, the wife sought dismissal. She submitted that there were no justifying circumstances here for such an order. Her counsel asserted that the filed evidence indicated she had minimal financial circumstances and there was no evidence about the financial circumstances of the other parties (as might be considered under s 117(2A)). She pointed to the fact that although the parties stood separately from each other, the husband held legal and/or beneficial interests in those entities. Obviously, I am not in any position to determine the relevance of that and it will be an issue for trial.
By reference to s 117(2A), the wife also submitted that there were no issues of inadequate pleadings or things of the nature of conduct to which the section refers. Whilst there may be some argument about that because her very application was perhaps unnecessary, she correctly observed that had she taken the course permitted under the rules, the respondents would have been obliged to have filed material anyway. The thrust of her submission as to the application itself was that the Court had made a finding that the evidence provided “by all parties” was “unclear and of a preliminary nature”. Whilst that of itself would not protect the wife against an order for costs as she was the instigator of the application, it is correct to say that it only became apparent how sparse the evidence was when various legal and equitable issues were teased out.
That said, the dismissal of the wife’s application against the entities essentially occurred because I considered there was no clear cause of action to be pursued in this Court against them (see B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113).
Whilst none of the parties raised the issue, the Court must look to its jurisdiction and power even if the issue is not agitated by those claiming the orders.
The reference in s 117 to “proceedings under this Act” provides the answer. The term “proceedings” is defined in s 4(1) of the Act as “…a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding”. Therefore, the power of the Court to make any order for costs lies in s 117. I consider that the power relates to both matters in which costs are sought by and against non-parties to a marriage or de facto relationship. Section 117(2) provides courts exercising jurisdiction in proceedings “under” the Act with the power to make an order for costs, subject to the presumption in ss (1) and, relevantly, ss (2A).
In this case, none of the parties to the substantive proceedings, nor those whom the wife had sought to join, disputed the power of the Court to make the types of costs orders sought in this case. Section 117 provides that subject to the statutory exceptions, each party to proceedings under the Act shall bear his or her own costs.
The unusual feature of the wife’s formal application to which I have referred in (9) above was that she did not seek to amend her initiating application and join the two entities but did so by application in a case. It was perhaps fortuitous that the entities attended and were represented but apart from wishing to be heard, they were not parties at that time.
The submissions of the two entities seem to suggest that as they were successful in defeating the application for joinder, costs should follow the event. If that was the approach taken, it would ignore the requirement that each party (subject to the exceptions) should bear their own costs (s 117).
If an order for costs is to be made, it is necessary to find there are “circumstances that justify” such an order and, if satisfied there is, consideration must be given to the relevant factors in s 117(2A). There is certainly an overlap between the justification for an order to depart from the main principle and the various factors in s 117(2A). None of those issues was raised by the entities.
The submission by C Pty Ltd said the wife’s application had been doomed to fail and was “hopeless” because apart from anything else, it did not propose any relief against the entity. That, in itself, would not necessarily be a basis to say the cause of action was “hopeless” but rather that the pleading itself was incompetent. The jurisdiction of the Court was dependent in this case on the financial agreement being set aside or varied.
Reliance was placed on facts asserted in the husband’s affidavit but the difficulty there is that I am unsure whether those facts are contentious. It was submitted that although the husband was a beneficiary of the C Trust of which the entity is the trustee, control vested in the husband’s brother (apparently as a result of the husband’s actions) and the husband was only a discretionary beneficiary. But for the jurisdictional issue, the Court might be justified in being cautious about the responses of the proposed third parties and the husband because, despite their protestations, there was evidence of the husband’s interest, if not some form of control, of the disputed assets. I was not (and am not now) in a position to make findings about those matters and argument was barely raised in relation to them.
As I have indicated, the s 117 issue was not addressed by the submissions (other than that of the wife) and therefore I have presumed that the application is put on the basis that the justifying circumstance to depart from the main principle is that the application of the wife was doomed to fail. Even if that could be so, none of the other factors that the court is required to address in s 117(2A) were addressed and I am not in a position to guess. In my view, the absence of those matters is concerning here because those matters deal with the financial circumstances of the parties, the way in which the litigation has been conducted and whether a party has been wholly unsuccessful. The provision also requires the Court to consider any other relevant factor in circumstances where there is at least the flavour of interconnection between the entity and the husband. As I have observed, I cannot make a finding on the untested evidence whether the husband is controlling the entities or the relevant actions. As I said in the reasons:
[24] The husband said:
24.[C] is the corporate trustee of the [C] Trust. It does not own property or hold assets in any capacity. Its sole purpose is to act as a corporate trustee.
25.I was the sole Director and Shareholder of [C] between 22 October 2008 and 16 May 2016. By way of further background information, the C Trust is a beneficiary of the [Mr Hijazi] Family Trust, which is the beneficial owner of the shares in [B Pty Ltd] that are held on behalf of the beneficiaries.
26.A similar structure applies to the [C] Trust. [Mr F] is the Appointor and I am a named primary beneficiary with [Mr F] and my mother.
27.[Mr F] and my mother asked me to step aside as the sole Director of [C] on or about 16 May 2016 when [Mr F] asked me to sign a Caveat on behalf of [Mr H], however, I refused. I understood that the Caveat was to be lodged because he became aware that I had utilised [C] funds to pay down the mortgage over the property at [D Street, Suburb E], which is owned jointly by the Applicant and I. I concede that I made the decision to utilise funds belonging to [C] without first obtaining the consent of [Mr F] and my mother.
[25]Despite what is described above, the husband did not explain how his directorship changed notwithstanding the records of ASIC. He said his decision not to consult his brother or mother “resulted in them bringing proceedings” in the Supreme Court of Victoria in which he and the wife are “Defendants”. That is surely odd. His mother and brother did not bring proceedings, [C] did. A different firm of solicitors acted upon the issuing of that writ. This whole situation is confusing and very unsatisfactory but the common positions seem to be that the husband no longer had control of [C]. A better explanation from the husband is necessary.
Absent some clarity around those matters, I could not be satisfied that it is just to make an order for costs against the wife in favour of C Pty Ltd even though I expressed concern about the way in which the wife approached the proceedings.
A similar fate faces B Pty Ltd. Its submission was that:
·The entity was not associated with the matter and was separate to the financial agreement that currently binds the husband and the wife;
·There was no clear cause of action pleaded against the entity;
·The proposed injunction would achieve nothing (if the financial agreement was not set aside);
·All of the evidence that could be put on behalf of the entity had been canvassed in the material before the Court.
The problem with the last dot point is that it was not that clear and simple. As I observed in the reasons [26] – [29], the wife seemed to be trying to stop the entity from recovering the car but I queried how it could do that anyway as the entity obtained a money judgment not an order for some form of specific performance by the return of the car. In addition, I queried how the entity might deal with the fact that if the financial agreement was binding, the husband might be required to indemnify the wife in relation to claims by the entity as the financial agreement seemed to say. The matter is compounded by the fact that the husband seems to be a director, or a person who has an interest in, the entity.
The submission then addressed the “basis for award of costs” and whilst that addressed the issue of the confusing nature of the wife’s application and asserted that it was “utterly unfounded”, the same issues as earlier mentioned in relation to C Pty Ltd were missing.
Insofar as the two entities were not a party to the marriage and more importantly parties to the litigation between the husband and wife, in my view, that is a relevant matter that can be taken into account in determining whether or not it was appropriate to make a costs order (s 117(2A)(g)).
That seems to be the proposition to be taken from Hendy and the Deputy Child Support Registrar and Anor [2001] FamCA 632; (2001) 27 Fam LR 641 where the Full Court said it could detect no error in the manner in which the trial judge dealt with a costs issue as between a parent and the Commonwealth where the trial judge had referred to the proceedings being perceived more as civil proceedings rather than as between parties to the marriage who were covered by the s 117 edict.
In taking those matters into account that require consideration under s 117(2A), I do not know what the financial circumstances of the entities are nor (as I have already said) what control (if any) the husband has in this despite the clear protestations that the entities are separate and the husband is not so directing this litigation. In my view for the reasons outlined, that remains opaque.
Having regard to the limited role that the two entities had in the wife’s application and the confused nature of the roles everyone played, I do not consider that I could find it just to depart from the principle that the entities pay their own costs.
Turning then to the husband’s application that an order be made that his costs be reserved. He submitted that the wife’s application did not seek relief against him but he was required to attend with counsel. It was then submitted:
…the proceedings as between the Husband and Wife are ongoing. It is submitted that it is appropriate that these issues as to costs be determined at the conclusion of these primary proceedings. It is noted that the Husband has an extant application for costs in relation to the primary proceeding if the Wife’s application top set aside the Financial Agreement fails.
With respect to the author of that submission, it does not give any reason why the costs issue is not being addressed but rather, seeking to adjourn it to trial. At trial, a different judge may have to determine a renewed application and, having regard to s 117 of the Act, whilst not impossible, it may be difficult to understand the justification for a departure from the principle that each pay their own costs in this particular case. This Court does not have the luxury of following the civil courts practice of “costs in the cause” or costs following the event. As no reason was given here for not addressing the question, I am not prepared to simply put the issue off.
Having said that, as it has been quite common for parties to agree on that course, I propose to give the husband the opportunity to file a proper submission or face the consequence that his application for the reservation of costs be dismissed.
I certify that the preceding Thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 28 October 2016.
Associate:
Date: 28 October 2016
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