Kalinec & Kalinec

[2021] FedCFamC1A 44

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1) APPELLATE JURISDICTION

Kalinec & Kalinec [2021] FedCFamC1A 44

Appeal from:

Kalinec & Kalinec [2021] FCCA 1860

Appeal number(s):

EAA 36 of 2021

File number(s):

SYC 5407 of 2018

Judgment of:

ALDRIDGE J

Date of judgment:

29 October 2021

Catchwords:

FAMILY LAW – APPEAL – COSTS – Appeal from orders dismissing an application for costs – Where the appellant is a third party to the marriage and was joined to the proceedings by the respondent – Where the appellant seeks costs from the respondent – Final property settlement orders made by consent – Whether the respondent was wholly unsuccessful in proceedings – Where the primary judge wrongly conflated issues of disclosure and joinder – Irrelevant consideration taken into account – Error established – Appeal allowed in part – Discretion re-exercised – Order varied – Respondent to pay the appellant’s costs of the appeal in a fixed sum.

Legislation:

Family Law Act 1975 (Cth) ss 79, 79A, 117(2A)

Cases cited:

Conrad and Another & Conrad (2020) 61 Fam LR 301; [2020] FamCAFC 255

E Pty Ltd and Ors & Zunino and Anor (No. 2) [2020] FamCAFC 272

House v The King (1936) 55 CLR 499; [1936] HCA 40

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Number of paragraphs:

42

Date of hearing:

8 October 2021

Place:

Sydney (via video link)

Counsel for the Appellant:

Mr Bolger

Solicitor for the Appellant:

Chatswood Law

Counsel for the Respondent:

Mr Rogers

Solicitor for the Respondent:

Avondale Lawyers

ORDERS

EAA 36 of 2021
SYC 5407 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTION

BETWEEN:

MS KALINEC

Appellant

AND:

MR KALINEC

Respondent

ORDER MADE BY:	ALDRIDGE J
DATE OF ORDER:	29 OCTOBER 2021

THE COURT ORDERS THAT:

1.The appeal is allowed in part.

2.Order 2 made by a judge of the Federal Circuit Court of Australia on 18 March 2021 is set aside and varied as follows:

2.The respondent pay the appellant’s costs of and incidental to the proceedings in the Federal Circuit Court of Australia, as agreed or in default, assessed.

3.The respondent pay the appellant’s costs of the appeal fixed in the sum of $16,000.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kalinec & Kalinec has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

ALDRIDGE J:

INTRODUCTION

1. This is an appeal from an order made by a judge of the Federal Circuit Court of Australia on 18 March 2021 which dismissed the appellant’s application for costs.

2. Mr Kalinec (“the respondent”) and Ms Kalinec (“the wife”) became involved in proceedings under s 79 of the Family Law Act 1975 (Cth) (“the Act”) which were commenced by the wife on 24 August 2018. In those proceedings, the respondent asserted that their daughter, Ms B Kalinec, (“the appellant”) held a property at Town Q (“the Town Q property”) on trust for the respondent, or alternatively, on trust for the respondent and the wife in equal shares. On 5 March 2019, the respondent filed an Application in a Case seeking to join the appellant to the proceedings and further sought an injunction that she be restrained from selling the property.

3. An order was made on 18 June 2019 joining the appellant to the proceedings as the second respondent and fixing the application for the injunction for hearing on 27 September 2019. On that date consent orders were made requiring the respondent to remove the caveat he had lodged over the title to the Town Q property, establishing a procedure for its sale and for the preservation of the proceeds of sale. Costs as between the appellant and the respondent were reserved.

4. The matter proceeded and the respondent’s claim was elaborated in Points of Claim and Amended Points of Claim. Points of Defence were filed by the appellant.

5. On 2 November 2020, consent orders were made resolving the proceedings as between the wife and the respondent. As expressed by the orders themselves, they finally determined the proceedings under s 79 of the Act between them, but the parties’ acknowledged that the respondent’s Application in a Case seeking a declaration that the Town Q property was held on trust for him would continue (Orders of 2 November 2020, Exhibit “A”). In short, the respondent and the wife agreed on the division of their property between them without waiting to see whether the Town Q property formed part of it.

6. It is impossible to tell from the appeal book whether the appellant was a party to these orders but her counsel asserted, without demur from the respondent’s counsel, she was not and that she did not become aware of them until after they were made.

7. The Court relisted matter on 11 November 2020 where all parties agreed that the orders of 2 November 2020 had deprived the Court of jurisdiction to hear the respondent’s application against the appellant because there was no longer a matrimonial cause before the Court. The upshot was an order that all outstanding applications and responses were then dismissed.

   THE APPEAL

8. The Notice of Appeal filed on 15 April 2021 contains seven grounds of appeal, but the complaints made by them essentially relate to the need for the respondent to join the appellant to the proceedings and whether the respondent was successful or not in his claim. Counsel for the appellant addressed the grounds in that fashion. I shall do the same.

9. The principles that apply to this appeal are those set out in House v The King (1936) 55 CLR 499 at 504–505:

   The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

10. The primary judge was not satisfied that a costs order was justified. His Honour took the view that as the respondent was obliged to disclose all of his interests in property to the wife he was obliged to disclose the beneficial interest he asserted that he held in the Town Q property. Respectfully, that is obviously correct. However, the primary judge went on to find that the obligation to disclose the interest required the respondent, in the interests of fairness, to join the appellant to the proceedings. Next, it was found that the respondent had not abandoned his claims because his application was dismissed for want of jurisdiction. Finally, the primary judge considered that both the respondent and the appellant had achieved some measure of success in the proceedings. As I shall explain, the appellant’s challenges to the first two findings succeed.

    Did the primary judge wrongly conflate the issues of disclosure and joinder?

11. His Honour was of the view, correctly of course, that if the respondent considered that he had an equitable interest in the Town Q property he was obliged to disclose that interest to the wife. As his Honour pointed out at [100]–[101], if the respondent had not disclosed that interest which he later recovered, the orders of 2 November 2020 would be susceptible to being set aside under s 79A of the Act.

12. His Honour continued:

    102.In asserting that he had a beneficial interest in that property, the [respondent] not only did right, but did as he was required under the Act, and the Rules, and the cases, by giving full and frank disclosure.

    103.Having asserted that interest, he brought the [appellant] before the Court by leave, represented by her legal practitioner, Mr U, and thereafter he brought her in as a party to the proceedings on the basis that the [respondent] was asserting that the Town Q property formed part of the matrimonial asset pool. That, indisputably, affected the interest of the [appellant] in that property, as she was the legal owner of the property, being the registered proprietor, and she asserted before the Court that she had beneficial interest in the property, either as to the whole or as to a greater part thereof. She became a necessary party to the proceedings in the interests of justice.

    104. There is no basis in relation to the [respondent] bringing that property or the [appellant] into the proceedings to found a costs order against him for the particular reason I have given, if for no other.

13. The appellant submitted that his Honour here wrongly confused joinder, which is not compulsory, with disclosure which is mandatory.

14. The purpose of disclosure is to ensure that each party to the property proceedings is aware of all relevant matters relating to the property of the parties, or to each other’s property. A claim to an equitable interest is obviously a matter which requires such disclosure.

15. The pursuit of that claim is an entirely different matter. The party disclosing the asserted interest might not be inclined to or be able to pursue the claim at that time. Nonetheless, the possibility of such a claim is likely to feature in any outcome between the parties. The property of the parties could be divided in the knowledge of the claim, with each party giving such credence to the claim and whatever value it might have as they saw fit or to tailor the orders to meet the possibility that the claim to the property would succeed.

16. Alternatively, the proceedings could be adjourned to enable proceedings to be taken in a court of appropriate jurisdiction.

17. In none of these cases would joinder of the third party to the property proceedings be required.

18. Here, the respondent decided to bring his claim in the proceedings under s 79 of the Act, which is a course which was, of course, open to him. However, the point is that the disclosure of the claimed interest did not require the respondent to take that particular course.

19. Further, even if the disclosure did require the respondent to bring proceedings against the appellant it must be remembered that he disclosed only an asserted interest in the property. Until the appellant or a judge determining the proceedings, accepted that the claim was a good one it remained no more than an assertion.

20. The appellant became a necessary party to the proceedings only because the respondent decided to pursue his claim against her in the Federal Circuit Court proceedings. Whether he was justified in taking such a course could only be determined by a finding that he did or did not in fact have such an interest.

21. In short, I accept that the primary judge did conflate disclosure and joinder and did thereby take an irrelevant matter into account.

    Did the respondent abandon his claim against the appellant?

22. The primary judge then turned to a consideration as to whether the respondent had abandoned his claim against the appellant, a matter which was then taken into account when determining the relative success of the parties. His Honour said:

    110.Another argument relied upon by the [appellant] is that the [respondent] effectively abandoned his claim against her in relation to the Town Q property by entering into final property settlement orders with the wife on 2 November 2020. I do not find force in that argument either.

    111.The [respondent] was entitled to resolve the matrimonial cause before the Court, that is the property settlement proceedings between himself and the wife. As a result of that, the issue between himself and the [appellant] fell out of jurisdiction, but that is not an abandonment of the [respondent’s] asserted interest in the property. It is not an abandonment in the sense spoken about in the matter of Kavanagh v Kavanagh (No.2) [2015] FCCA 3296 referred to by [the appellant’s counsel] and [the appellant’s solicitor] in the written submissions for the [appellant].

    112.That issue is simply left hanging between the [respondent] and the [appellant], without it being able to be adjudicated upon by this Court for lack of jurisdiction, but it necessitated one of the parties going to a court of competent jurisdiction to fight it out. It did not amount to an abandonment of that issue. The end of the proceedings and that issue dropping out of jurisdiction, I find by no means represents an action estoppel in relation to that issue preventing either party from agitating it. It certainly could not prevent the [appellant] agitating that issue with the [respondent], because she was not a party to the final property settlement orders made on 2 November 2020, and I find that it would not be the case that there would be action estoppel preventing the [respondent] agitating that before another court.

23. The point made by the appellant, however, is not whether the respondent abandoned his assertion that the appellant was holding the property on trust for him but whether, in the circumstances the joinder of the appellant to the proceedings had been fruitless.

24. When he settled his dispute with the wife and the orders were made, the Court no longer had jurisdiction to hear the proceedings against the appellant. This meant that the joinder of the appellant to the proceedings had been entirely pointless. The decision to join the appellant and the decision to resolve the proceedings at the time that he did were decisions made by the respondent. The effect was that the proceedings between the respondent and the appellant remained unresolved and would have to be litigated elsewhere. The steps taken by the appellant and the costs incurred by her were entirely wasted.

25. It follows that the primary judge took into account an irrelevant consideration (whether the respondent had abandoned his claim against the appellant) and failed to take into account a relevant consideration (that the costs incurred by the appellant had been entirely wasted).

    Were the proceedings wholly unsuccessful?

26. Finally, it was submitted that his Honour erred in failing to find that the proceedings against the appellant were wholly unsuccessful (s 117(2A)(e) of the Act).

27. The primary judge said:

    17.Notably, orders were made by consent in accordance with a minute of order as between the [respondent] and the [appellant] providing for the Town Q property to be sold; for the [respondent] to provide to the [appellant] a notice of withdrawal of the caveat that he had had registered on the title of the property; setting out the procedure for sale, the consequences if the sale was not affected, and providing that the residue of the proceeds of sale be paid into a controlled monies account on behalf of the parties, which, at that time, meant the [respondent], the wife, and the [appellant], and for those monies not to be released until further order of the Court or written agreement between the parties.

    …

    119.In relation to whether a party to the proceedings has been wholly unsuccessful in the proceedings, and, of course, per the cases, it does not have to rest with being wholly unsuccessful – the Court can give consideration to the degrees of success or lack of success of parties in the proceedings – the [appellant] was not wholly unsuccessful in the proceedings, having come into the proceedings seeking orders for sale of the Town Q property. That was at a time when the [respondent] sought orders in relation to the Town Q property that awarded that property to the wife as part of the property settlement division between the parties.

    120.Orders were made by consent between the parties in September 2019 for the sale of that property. To that extent, there was certainly some success in the application brought before the Court on the interim basis by the [appellant]. Her application for final orders never went to adjudication, because, of course, it fell out of jurisdiction before it could be considered.

    121.In relation to the balance of the [appellant’s] interim application, that is, as to how the proceeds of sale of the Town Q property should be distributed, that was never adjudicated upon by the Court, and the Court found itself without jurisdiction before it could adjudicate upon that.

    (Emphasis added)

28. Counsel for the respondent supported the above passages by relying on the fact that the respondent had obtained a freezing order, albeit by consent, and thereby had some measure of success against the appellant.

29. That is certainly so, but it must be recalled that the application that led to the freezing order was an interlocutory application in the application against the appellant which, as we know, ultimately did not proceed. It follows that the interlocutory application itself turned out to be unnecessary.

30. There was scope, therefore, for his Honour to have found that the proceedings were wholly unsuccessful. His Honour did not. In doing so, the primary judge was entitled to take into account the conduct of the parties on the interlocutory application and the relative success of the parties (s 117(2A)(g) of the Act). Whilst not all judges would have followed the course taken by his Honour, I am not satisfied that in doing so the primary judge erred in fact or principle or that the outcome on that issue was plainly unjust.

31. This aspect of the appeal does not succeed.

32. However, for the reasons given earlier, the appeal must be allowed and the order set aside.

    What order should be made?

33. In that event, both parties asked me to re-exercise the discretion as to costs. They did not seek to rely on any further evidence or to expand on the submissions already made. Of the matters raised by s 117(2A) of the Act, the parties relied on but two.

34. His Honour said that he had some scant knowledge of the parties’ finances, but that each of the appellant and the respondent “have some financial means, and each has ownership of some property” (at [114]).

35. The only other matter raised by the parties as relevant was the relative success of the parties and the unnecessary joinder, as it turned out, of the appellant.

36. The respondent joined the appellant to the proceedings but did not obtain the relief sought because the consent orders between him and the wife deprived the Court of jurisdiction. His application was dismissed. While the merits of that application were not resolved in the proceedings the fact remains that the respondent’s applications against the appellant were fruitless and the costs the appellant incurred, including those relating to the interlocutory applications, entirely wasted.

37. Costs are not awarded as punishment but rather as compensation for costs that ought not to have been incurred (Latoudis v Casey (1990) 170 CLR 534).

1. Finally, the appellant was a third party to the marriage. It is established that the court will more readily award costs to such a party (Conrad and Another & Conrad (2020) 61 Fam LR 301 at [43]; E Pty Ltd and Ors & Zunino and Anor (No. 2) [2020] FamCAFC 272 at [17]). That is particularly so where the claim is one that would ordinarily be brought in a court, such as the Supreme Court of New South Wales, where the default position is that costs follow the event.

2. For these reasons, the appropriate order is that the respondent pay the costs of the appellant of and incidental to the proceedings in the Federal Circuit Court, as agreed or in default, as assessed.

   COSTS

3. The respondent, most properly, accepted that if the appeal was allowed, a costs order in favour of the appellant was appropriate.

4. The appellant, in turn and again properly, accepted that not all of the matters in her filed costs schedule were in compliance with the order of the Appeal Registrar, and should not have been properly included.

5. Doing the best I can there will be an order that the respondent pay the appellant’s costs fixed in the sum of $16,000.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge.

Associate:

Dated:       29 October 2021