KALLEN & ALVIN (COSTS)

[2015] FamCA 285

FAMILY COURT OF AUSTRALIA

KALLEN & ALVIN (COSTS) [2015] FamCA 285

FAMILY LAW – COSTS – Where the wife makes an application for costs – where costs are ordered on a party and party basis.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

APPLICANT: Ms Kallen

RESPONDENT: Mr Alvin

FILE NUMBER: BRC 11120 of 2009

DATE DELIVERED: 22 April 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 13 April 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Anderson of Counsel

SOLICITOR FOR THE APPLICANT: Johnsons Solicitors

COUNSEL FOR THE RESPONDENT: Mr Hackett of Counsel

SOLICITOR FOR THE RESPONDENT: Michelle Porcheron Lawyers

Orders

1. That the husband pay the wife’s costs of and incidental to the wife’s Application filed 24 February 2014 on a party and party basis and that, for this purpose, the wife’s costs be determined by agreement between the parties and failing agreement, be as assessed by a registrar pursuant to Chapter 19 of the Family Law Rules 2004 (Cth).

2. In the event that the husband and wife are unable to agree within seven (7) days of the date of these Orders as to how the costs in respect of this costs application should fall:

   (a)the wife shall, within fourteen (14) days from the date of these Orders, file and serve submissions in support of her application for costs of this costs application; and

   (b)the husband shall, within a further seven (7) days from the date of service of any such submissions upon him, file and serve any submissions in response.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 11120 of 2009

Ms Kallen

Applicant

And

Mr Alvin

Respondent

REASONS FOR JUDGMENT

1. On 30 August 2013, I made orders in property adjustment proceedings between the parties in this matter that included an obligation on the wife to pay the husband approximately $700,000 within sixty days and an obligation on the husband to “forthwith do all such things and execute all such documents necessary” to refinance certain security and to release the wife from an unlimited personal guarantee provided to secure a loan that the husband was to retain responsibility for and to release a company (the ownership and control of which were being retained by the wife) from a guarantee given in respect of the same loan facility.

2. The terms of the orders, including those creating those two obligations, had been settled by Queen’s Counsel for the husband and counsel for the wife before I made them, save for the fixing of the sixty day period within which the money was to be paid. I determined that time period after hearing submissions from each party.

3. On 5 September 2014, I set aside my original orders and substituted fresh orders after hearing and determining the wife’s application pursuant to s 79A of the Family Law Act 1975 (Cth) (“FLA”).

4. That application was brought by the wife because the husband had not complied with his obligation to refinance the security and procure the releases. She was suffering financial prejudice as a consequence and had elected to withhold the payment of the $700,000 to the husband until the security was refinanced and the releases procured.

5. Although the husband had not met his obligation, he was demanding that the wife meet hers and pay him the money owed plus interest. He met her with assertions that he could not force third parties to effect the refinancing and the releases required but that she must nevertheless pay him what she owed him along with interest.

6. The wife filed the application pursuant to s 79A, asserting that there had been a miscarriage of justice or, alternatively, that it was impracticable for the orders to be carried out in the circumstances that had arisen since the orders had been made.

7. The husband initially opposed the wife’s application to set aside my original orders. On 8 May 2014, he offered to bear his own costs incurred on her application if she paid him the $700,000 plus interest.

8. The same day, 8 May 2014, the wife offered to settle her application pursuant to s 79A by paying him the $700,000 in exchange for the release from the liabilities. Her offer was put as simply as that. She told the husband the offer was open until it was withdrawn. There is no suggestion that it was ever withdrawn. It certainly was not accepted by the husband.

9. The wife’s application was listed for hearing before me in a duty list on 12 May 2014. I could not fit the hearing in my list that day and adjourned the wife’s application for hearing before me on 19 August 2014. Written submissions for the husband filed 6 May 2014 made it clear the husband sought to have the wife’s application dismissed and orders made that she pay him the $700,000 plus interest, as well as costs.

10. On 12 May 2014, there was some discussion between bench and counsel during which I expressed some preliminary views about the matter.

11. On 13 August 2014, the wife’s solicitors sent a draft of proposed orders to the husband’s solicitors inviting the husband to consent to them. That draft included, in essence, provision for the $700,000 to be paid to the husband in exchange for the releases. It also included provision for the $700,000 to be paid to the loan facility secured by the mortgage and the guarantees in the event of the default of the husband in securing the releases from the liabilities.

12. The husband’s solicitors responded with their own draft of proposed orders on 15 August 2014, which included variation of my original orders. It included provision for the payment by the wife of the $700,000 plus interest fixed at approximately $30,000 upon the husband either obtaining the releases or the refinance or discharge of the relevant loan facility. It also included provision for the husband only to be obligated to “use his best endeavours to forthwith procure a release of the” wife and her company from the guarantees or the refinance or discharge of the loan facility. It did not include provision for the payment of the money to the loan facility in default of the husband’s obligation as sought by the wife.

13. At the hearing of the application, in support of the principal submission that the wife’s application should be dismissed, counsel for the husband submitted that the husband had done all that was required of him pursuant to the original orders. It was submitted that he had used his best endeavours to effect the releases of the guarantees but could not be held responsible for the refusal of third parties. Counsel referred to evidence that the commercial property that was primary security for the loan facility was on the market and submitted that the Court ought be satisfied that the loan facility would be discharged upon its sale and, therefore, there was no need to vary the original orders. However, apparently sensing the Court’s mood to set aside the original orders, counsel for the husband handed the Court the draft of proposed orders sent to the wife on 15 August 2014 and, ultimately, submitted that if the Court did not accept his principal submission that the orders in that draft should be made instead.

14. The solicitor who was second respondent to the s 79A application made the submission that the original orders should not be varied because of the likelihood of the loan facility being refinanced or discharged in the not too distant future, in any event.

15. In my judgment of 5 September 2014, I determined that the obligation on the husband in the original orders was not just to use his best endeavours to bring about release of the security and the guarantees but to actually procure the release of the security and the guarantees. I found that was clearly what the orders the parties themselves had drafted said and I found that was consistent with my original reasons for judgment. I found, as argued in the alternative by counsel for the wife, that it was, in the circumstances, impracticable for the orders to be carried out. I discharged my original orders and made new orders requiring the wife to pay the husband the $700,000 only on the refinancing or discharge of the loan facility and release of the guarantees. I made no order for what was to happen on default and I made no order for the husband to be paid interest on the sum of $700,000.

16. The wife then filed an application for the husband to pay her costs of and incidental to the application pursuant to s 79A. It is in her amended Application in a Case that she makes it clear that she only seeks costs against the husband and not also against the intervening solicitor.

17. I heard the application in my duty list on 3 April 2014. I was informed that day that the release of the security and the guarantees has now been effected and the $700,000 paid to the husband.

18. If the Court is of opinion that there are circumstances that justify it in doing so it may make such order as to costs as it considers just (s 117(2) of the FLA).  In this case, I am of the opinion that the circumstances justify the making of a costs order against the husband as sought by the wife.

19. The husband’s primary contention was for the wife’s application to be dismissed, for him to be paid the $700,000 plus interest and costs, and to simply let the husband’s obligation to procure release of security and guarantees be met in the fullness of time upon ultimate sale of the commercial building that was primary security. His position, which I clearly rejected, was that he was only ever required to “use his best endeavours” to procure releases. His argument was rejected and he was unsuccessful in his primary contention.

20. The wife sought to have the original orders discharged and replaced with the clear linking of her obligation to pay the husband $700,000 with the husband’s obligation to procure release of security and guarantees. She was successful. She had made a written offer to settle on that basis in May 2014, before the first listing of her application. That offer was not expressly withdrawn, but probably was, by implication, with the proposed orders sent to the husband on 13 August 2015 which included provision for payment to the loan facility of the $700,000 in default of the husband procuring the releases. The offer had been open for acceptance for over three months, most of which was after 12 May 2014, the day on which my preliminary views that were, in my view, consistent with my ultimate findings and determination, were made known to the parties and their legal representatives in open court. The wife’s offer was not accepted. Having regard to the outcome, it should have been. The husband should have, in the circumstances, accepted that the wife’s obligation to pay him was contingent upon her release from the securities and guarantees. I consider that a significant factor in the determination of this costs application.

21. The husband’s fall-back position at the hearing of the application still involved payment to the husband of interest on the $700,000 whilst at the same time not requiring the payment of the $700,000 before refinancing or discharge of the facility and release of securities. He was unsuccessful in his bid to have interest paid to him.

22. In her application pursuant to s 79A, the wife sought to have a default provision included in the fresh s 79 orders she sought, but that was not ultimately ordered. As such, the husband, who opposed such inclusion at the hearing could not be said to have been entirely unsuccessful. However, I do not consider that sufficient reason not to make a costs order against him, given that until the hearing he was still principally seeking dismissal of the wife’s application, immediate payment of the $700,000 plus interest and costs. Although he communicated to the wife just a few days before the hearing that he was prepared to vary the orders so as to link the payment of the $700,000 to the refinance or discharge and the release of security and guarantees, he still insisted on her paying him interest. It was reasonable for her not to agree to do that having regard to my ultimate determination on that point.

23. The husband has now received payment of the amount of approximately $700,000. Out of that he had to pay money that he owed the intervening solicitor for work that solicitor had done for him in the matter in its early days. He also had to repay $14,000 to the parties’ self-managed superannuation fund. He also retained other significant property interests. There can be no doubt about his financial capacity to pay the costs order sought by the wife.

24. Finally, the husband submits there is relevance in there being no explanation by the wife as to why she does not seek costs against the intervening solicitor. I am not persuaded that this detracts from the determination that a costs order against the husband is justified in the circumstances. I am minded to the view that the solicitor would have been unlikely to oppose any variation of the original orders that might have been agreed to by the husband and the wife where his interests would have been protected.  It would only have been in circumstances where a default clause such as the one sought by the wife would have been made and the husband defaulted that the solicitor’s interests might have been prejudiced. The solicitor made his opposition on that point known at the hearing but made no other submissions of opposition to the application. I did not make an order including the default clause and the husband has not defaulted on his obligation, imposed in the fresh s79 orders, to procure the releases. It is unsurprising that the wife does not seek costs against the solicitor as well.

25. On the same point, I note also that the husband did not seek any order against the intervening solicitor in the event that he was made subject to a costs order himself. 

26. I consider a costs order justified and I order that the husband pay the wife’s costs of and incidental to the wife’s application filed on 24 February 2014 on a party and party basis and that, for this purpose, the wife’s costs be determined by agreement and failing agreement as assessed by a registrar pursuant to Chapter 19 of the Family Law Rules 2004 (Cth).

27. In the event that the husband and wife are unable to agree within seven days of today as to how the costs in respect of this costs application should fall, I will give the wife fourteen days from today within which to file submissions in support of her application for costs of this costs application and the husband a further seven days from the date of service of any such submissions upon him to file any submissions in response.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 22 April 2015.

Associate: 

Date:  22 April 2015