K and K and Ors

[2009] FamCA 1

FAMILY COURT OF AUSTRALIA

K & K AND ORS [2009] FamCA 1

FAMILY LAW – COSTS – Third party costs where wife successful before judge at first instance but failed on appeal – Order for costs in relation to the first instance hearing – Costs of third parties released from the proceedings by the Full Court

Family Law Act 1975 (Cth)

Penfold v Penfold (1980) FLC 90-800

APPLICANT: Ms K

RESPONDENT: Mr K

2^ND TO 24^TH RESPONDENTS: B Pty Ltd and Ors

FILE NUMBER: MLF 1913 of 2001

DATE DELIVERED: 6 January 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: By way of written submissions

SUBMISSIONS RECEIVED FROM

SOLICITORS FOR THE APPLICANT: LANDER & ROGERS

SOLICITOR FOR THE RESPONDENT

HUSBAND:

KENNA TEASDALE

SOLICITOR FOR THE RESPONDENT

HUSBAND:

MICHAEL J WILLIAMS

Orders

1. That the wife pay the costs of the husband and the third parties relating to the proceedings before Morgan J that culminated in orders on 21 September 2005 such costs to be agreed and in default of agreement as assessed pursuant to the Family Law Rules 2004.

IT IS NOTED that publication of this judgment under the pseudonym K & K and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1913  of 2001

MS K

Applicant

And

MR K

Respondent

And

B PTY LTD & ORS

2^nd to 24^th Respondents

REASONS FOR COSTS JUDGMENT

1. On 21 September 2005, Morgan J made orders in this matter which have been well documented in other reasons for judgment.

2. Her Honour’s orders included the joining of third parties.  The Full Court subsequently allowed an appeal by the third parties and discharged her Honour’s orders.

3. Her Honour also reserved the question of costs of the application and it is that order that brings the matter to me because of the fact that her Honour has now retired. 

4. On the appeal in the Full Court, their Honours said:

   Mr North opposes a costs order on the basis of a significant disparity in assets between husband and wife.  This, of course, does not go to the position of the third parties.  Having regard to the outcome of the proceedings, we consider that the wife should pay the costs of the husband and the third parties.

5. On 30 October 2008, I ordered that an earlier order relating to the filing of submissions be extended to enable the wife for the time to respond. 

6. In this case, the third parties and the husband seek costs from the hearing before Morgan J.  The wife opposes the making of any order for costs.

7. The submission of the third parties was filed on 30 October 2008.  It pointed to the fact that the third parties had always vigorously resisted being joined in the proceedings and they were ultimately successful in the Full Court.  The submission pointed to the fact that the Full Court upheld the appeal and that the wife was therefore wholly unsuccessful in respect of the application before Morgan J.  It was therefore said that an order for costs should follow the event.

8. In so far as it may be argued that there is a disparity in financial circumstances between the third parties and the wife, it was argued that the Full Court had dealt with that issue in its judgment.  Accordingly, it is said that it would be inconsistent with the Full Court’s ruling if the wife did not also have to pay the costs of the proceedings before Morgan J.

9. The husband by way of submission adopted a similar position to the third parties.

10. The wife’s initial submission was that the issue should be left to the trial judge but I rejected that.  The wife filed a subsequent submission on 27 November 2008.

11. The wife submitted that the financial circumstances of the husband and the proposed third parties were superior to those of the wife. She pointed out however that there was nothing in the Family Law Rules that required particulars or a statement of claim to be filed. In May 2005, Guest J made no specific order for particulars. Morgan J had not ordered any either.

12. The wife argued that the appellable error was that of the trial judge.  In that respect she was quite correct.  The wife however then says:

    Financial consequences of that error (in so far as it results in any orders for costs) ought not be sheeted home to the wife particularly given the economically superior positions of the husband and the proposed third parties. (emphasis mine)

13. The difficulty with the wife’s submissions is that it was similar (if not identical) to that put to the Full Court and rejected as I have set out above.

14. The provisions relating to orders for costs are clear. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party shall bear their own costs unless the Court finds that there are circumstances which justify it departing from that principle. In considering what order (if any) should be made, the Court is required (inter alia) to have regard to the matters referred to in s 117(2A). I shall refer to those below.

15. In Penfold v Penfold (1980) FLC 90-800 the High Court of Australia said that the general rule expressed by s 117(1) was not paramount to s 117(2). That is, when a court finds circumstances justifying an order for costs, the principle that each party should bear their own costs should give way.

16. Thus, s 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.

17. Here, the Full Court on the appeal from the orders of Morgan J provides guidance.  The Full Court said:

    52.We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved.  Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.

    ...

    63.In our view, the correct conclusion was that, as the wife set out her proposed claim, she did not show that the power conferred by s 90AE could arguably be engaged.  Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties.  The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles.

    64.It would be impossible, based upon the wife’s deposition, to identify what the wife said were the facts material to a cause of action which would lead to an order that the trustees of a discretionary trust distribute to one of a group of beneficiaries.  The amendment would have joined the third parties to an unformulated claim to which they would have had great difficulty responding.  That Morgan J did not address this issue is, in our view, an appealable error.

    65.In suggesting that Morgan J’s order did not cause the third parties substantial injustice, Mr North submits that because claims, other than those with which we have been here concerned, had been already made against some of the third parties, for example, to register transfers of shares from husband to wife, a successful appeal would not release all third parties from the litigation.  However, though some or all of the third parties may remain in the action because of those other claims, they are of a comparatively very limited nature and may not call for any substantial participation in proceedings by the third parties.

18. Notwithstanding the fact that Morgan J approached the matter incorrectly as found by the Full Court and indeed Guest J as well only ordered limited materials be filed, it is the case that the Full Court said that it is not “proper” to allow joinder without sufficient facts being asserted to demonstrate that the law can provide the relief sought. That must mean that the wife’s case was deficient. That in turn, subject to a consideration of the matters in s 117(2A) justifies a departure from the principle in s 117(1).

19. I turn then to consider the matters in s 117(2A).

20. The wife consistently argues against the third parties about the disparity of their financial position as against hers.  Here, as the Full Court said, they were not in the same position as the husband and the wife in relation to costs.  The wife similarly argues against the husband that his financial capacity is greater than hers presumably because she maintains the link between the husband and the third parties.  However, before me, Mr Spicer of counsel for the husband has consistently maintained that both parties have modest financial circumstances.

21. The financial circumstances of the parties are such that whilst they have modest means, they are both embroiled in litigation which is costly.  The wife in bringing the litigation to join the third parties, drags the husband along with her.  Costs orders are not intended as a punishment but rather to compensate the party who is otherwise unwillingly engaged in the litigation.  Here, the financial circumstances of the parties may be modest but that alone does not justify a refusal to make an order for costs.  If it were otherwise, parties could bring applications without any thought to the financial consequences.

22. I have not been advised of any legal aid assistance provided to the parties.

23. I have taken into account that the conduct of the parties to the proceedings was appropriate in the sense set out in s 117(2A) that there was no suggestion of any wrong doing or recalcitrance. Here, there was a simple failure to plead a case and the whole matters were argued on that basis.

24. There is no suggestion before me of a failure to comply with any court orders.

25. Importantly for the purposes of my orders, the wife has been wholly unsuccessful.

26. In the circumstances, and in the exercise of my discretion, it is appropriate to make an order that the wife pay the husband’s costs and those of the third parties in default of agreement then according to the Family Law Rules 2004.

I certify that the preceding Twenty Six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  6 January 2009