Johanson and Johanson (No. 2)

[2018] FamCA 806

FAMILY COURT OF AUSTRALIA

JOHANSON & JOHANSON (NO. 2) [2018] FamCA 806

FAMILY LAW – COSTS – s 117 – where the matter heard was an interlocutory matter – where between party costs are awarded – where the husband is to pay the wife’s costs – where there is a dispute regarding a financial agreement – where the husband sought a declaration that the parties had abandoned the financial agreement - where the husband is seeking a declaration that the binding financial agreement is unenforceable – where the dispute regarding the enforceability of the financial agreement remains an issue for determination – where the court has the power to make costs if the Court is of the view that there are circumstances that give rise to costs – where the presumption that each party should bear their own costs is rebutted - here the husband has the financial capacity to meet a costs order – where the husband continues to be non-compliant with the terms of the financial agreement – where the husband’s non-compliance puts the wife in a difficult financial position – where the wife is entitled to rely on the financial agreement unless it has been set aside or there has been agreement otherwise – where the Court has exercised discretion in the awarding of costs.

Family Law Act 1075 (Cth) s 117

Madin v Palis (2016) 55 Fam LR 59

APPLICANT: Ms Johanson

RESPONDENT: Mr Johanson

FILE NUMBER: BRC 6694 of 2017

DATE DELIVERED: 25 September 2018

PLACE DELIVERED: Sydney

PLACE HEARD: Brisbane

JUDGMENT OF: Cleary J

HEARING DATE: 21 September 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Drysdale

SOLICITOR FOR THE APPLICANT: Best Wilson Buckley Family Law

COUNSEL FOR THE RESPONDENT: Mr Ferraro

SOLICITOR FOR THE RESPONDENT: O’Shea & Associates

Orders

1. The husband shall pay to the wife, costs on a party/party basis as agreed or assessed, in respect of the hearing on 12 and 13 April 2018; such payment to be within 28 days of agreement or assessment, whichever event occurs first.

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 Johanson & Johanson (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 SYDNEY

FILE NUMBER: BRC 6694 of 2017

Ms Johanson

Applicant

And

Mr Johanson

Respondent

EX TEMPORE REASONS FOR JUDGMENT

Introduction

1. This is an application by Ms Johanson, the wife, for costs. The costs application arises from the hearing of an interlocutory matter on 12 and 13 April 2018 in Brisbane.

2. The issue determined arose from one order sought in an Amended Response of Mr Johanson, filed on 9 March 2018. A declaration was sought that, by their conduct, the applicant and the respondent had abandoned the Financial Agreement dated 22 January 2014.

3. I will refer to the contentious Financial Agreement as the “BFA”.

Evidence

1. The documents relied on in this costs application are as follows:

   The Applicant Wife

   a)Application in a case, filed 10/07/2018 July 2018;

   b)Affidavit of Ms Johanson filed 19/06/2018;

   c)Financial Statement of Ms Johanson filed 3/07/2017;

   d)Outline of submissions;

   The Respondent Husband

   e)Response to an Application in a Case filed 13/09/2018;

   f)Affidavit of Mr Johanson filed 13/09/2018;

   g)Case outline document.

2. By her Amended Application filed on 9 March 2018, the wife had sought a declaration of validity of the BFA, an enforcement of the spousal maintenance and life insurance components of the BFA and a declaration of amounts outstanding.

3. By his Amended Response filed 9 March 2018, the husband sought a declaration that the BFA was void and unenforceable, as he had in his original Response filed in 2017. In addition, he sought for the first time the declaration referred to in the opening of these reasons, that is, that the parties had abandoned the BFA.

4. The proceedings were listed in the first week of a rolling list of matters allocated for final hearing.

5. By agreement between the parties, what I will refer to as the abandonment argument was heard first as a discrete issue. The argument, a complex one, ran into two days, and included cross-examination of a solicitor. Judgment was reserved.

6. The possible consequence, acknowledged from the outset, was that the opportunity would be lost to have the final dispute heard on the contested issue of whether or not the BFA was valid and enforceable. That final issue remains for determination.

The Law

1. Subject to certain statutory exceptions, the legislative principle of section 117 of the Family Law Act 1975 (Cth) (“the Act”) is that each party to proceedings should bear his or her own costs. If the Court is of the opinion that there are circumstances that justify it in doing so, the Court may make such order as to costs as the Court considers just.

2. In this case, an interlocutory issue has been dealt with. Almost certainly, another judge of this Court will hear and determine the matter on a final basis.

3. The opportunity for the final hearing in April 2018 was lost. These circumstances justify exercising the discretion as to whether or not a cost order should be made. There are mandatory considerations in s 117(2A) of the Act. Of those, the following are relevant.

(a) Financial circumstances

1. There is no doubt that the husband has the financial capacity to meet a costs order. The husband had an average income in the 2017 financial year of $16,569 per week.

2. I have no reason to doubt that the husband has the commitments stated in his affidavit,[1] but that does not eliminate the possibility of a costs order. There is authority for costs orders being made against even an indigent party.

   [1] Affidavit of the husband filed 13/09/2018, par 4(c)

3. Of course, capacity alone to meet a cost order is not sufficient reason to make one. There is an enormous disparity of incomes between the parties. The wife earns about 20 times less than the husband, with an income of $850 per week, which is a factor to take into account.

(c) Conduct

1. There is nothing about the procedural conduct of the matter which would prompt a costs order. However, the application itself was a novel argument without authority.

(e) Unsuccessful in the proceedings

1. The applicant, properly advised, as I am confident he was, would have known that there was a risk the argument would fail, and if it did he would be entirely unsuccessful. That proved to be the outcome.

(f) Offers in writing 

1. The husband did make an offer to settle.[2]  He proposed that if the wife consented to Order 2, the abandonment argument, then he would not pursue costs. Had the husband been successful with the abandonment argument, that offer may have been persuasive in respect of his own costs application.

   [2] Affidavit of the husband filed 13/09/2018, Annexure SJ1

2. Had the wife accepted the offer, she would have been immeasurably worse off.

3. By agreeing to the BFA having been abandoned, she would have given up her rights to enforcing it. Her only option would have been to accept the new BFA on offer, if it remained on offer. It is certainly no matter for criticism that the wife did not take up the offer.

(g) Any other matters

1. There are two matters I take into account. First, the husband continues to be non-compliant with the terms of the BFA. This action, or lack of it, places the wife in a difficult financial position. The wife is entitled to rely on the BFA, unless it is set aside or there is agreement otherwise.

2. Second, the fact that the wife has a deferred fee agreement. That is a matter between herself and her legal representatives. I do not accept the submission that the wife does not have a liability to pay her outstanding fees. She does, but payment is deferred.

Conclusion

1. For the reasons identified, the Court concludes that the discretions should be exercised in favour of an order for costs.

2. Quite properly, concessions were made on behalf of the wife that indemnity costs may not be appropriate, namely that the interlocutory argument, although novel, was not obviously bound to fail. Further, that there were no exceptional circumstances as have been identified by authority as necessary.

3. The case of Madin & Palis[3] was raised, a decision of the Full Court. In that case, the appellant had succeeded in having the dismissal of an application and consequential costs order set aside on appeal. The application of the appellant for the respondent to pay his costs on an indemnity basis failed primarily on the basis that the offer of settlement was incapable of being accepted at law. However, both parties were granted cost certificates arising from the appeal. I do not consider that the decision of the Full Court has direct bearing here.

   [3] (2016) 55 Fam LR 59

4. Orders are made accordingly.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the ex-tempore reasons for judgment of the Honourable Justice Cleary delivered on 25 September 2018.

Associate: 

Date:  25 September 2018