Karbines & Karbines and Anor
[2009] FamCA 284
•2 April 2009
FAMILY COURT OF AUSTRALIA
| KARBINES & KARBINES AND ANOR | [2009] FamCA 284 |
| FAMILY LAW – COSTS – husband to pay the costs of the intervenors FAMILY LAW – COSTS – application by the wife for costs on an indemnity basis – where the conduct of the husband is a very significant factor in the proceedings – where an order for costs is justified – where the wife has incurred significant costs – whether costs should be ordered according to the scale or on an indemnity basis – whether the order for costs should run from the commencement of the proceedings or the commencement of the preparation for trial – husband to pay the wife’s costs from the commencement of the proceedings on an indemnity basis |
| Family Law Act 1975 (Cth) s 117 Tetijo Holdings Pty Ltd and Keeprite Australia Pty Ltd [1991] FCA 187 LGM & CAM (Contempt) (2008) FLC 93-355 |
| APPLICANT: | Ms Karbines |
| RESPONDENT: | Mr Karbines |
| INTERVENOR: | Mr and Mrs Willa |
| FILE NUMBER: | MLF | 2479 | of | 2005 |
| DATE DELIVERED: | 2 April 2009 |
| PLACE DELIVERED: | Adelaide |
| JUDGMENT OF: | Dawe J |
| HEARING DATE: | 2 April 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr A.L. Jordan |
| SOLICITOR FOR THE APPLICANT: | Maddens Lawyers |
| COUNSEL FOR THE RESPONDENT: | N/A |
| SOLICITOR FOR THE RESPONDENT: | N/A |
| COUNSEL FOR THE INTERVENORS: | Mr H. Bersee |
| SOLICITOR FOR THE INTERVENORS: | Herman Bersee |
Orders
The husband pay the costs incurred by Mr Willa and by Mr and Mrs Willa in the proceedings before the Family Court of Australia such costs to be as agreed and failing agreement within twenty-one [21] days from today such costs to be as taxed by a Registrar of this Court (“the [Willa] costs”).
The husband pay the wife’s costs of and incidental to the proceedings before the Family Court of Australia from the date of commencement until the present time such costs to be assessed on an indemnity basis in accordance with the costs agreements entered into by the wife with her solicitors and counsel, such costs to be paid from the monies retained by the solicitors for the wife fourteen [14] days after the solicitors for the wife provide a detailed account to the husband.
Pending the ascertainment of the exact figure for the “Willa costs” the sum of THIRTY THOUSAND DOLLARS [$30,000.00] be held in the Trust Account of the wife’s solicitors on account of those costs until the taxing of the costs has been completed and to remain there until payment and that such payment for the “Willa costs” have priority over the payment of the wife’s costs.
Wife’s solicitors have leave to file an Application in a Case as to the sale of the Y Street property in G in the State of South Australia within thirty [30] days of today.
IT IS NOTED that publication of this judgment under the pseudonym Karbines and Karbines and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: MLF 2479 of 2005
| MS KARBINES |
Applicant
And
| MR KARBINES |
Respondent
| MR AND MRS WILLA |
Intervenors
EX-TEMPORE REASONS FOR JUDGMENT
I make order 1 in relation to the two sets of proceedings, one in relation to Mr Willa and one in relation to Mr and Mrs Willa. I do that on the basis that the proceedings in relation to Mr and Mrs Willa, in relation to the sale of the properties, have been wholly successful to the extent that the husband has been wholly unsuccessful in his opposition to the orders and rarely put forward any argument which would have been considered an appropriate argument to oppose the orders sought by Mr and Mrs Willa for the sale of those properties.
In relation to the claim made by Mr Willa (in which the husband was not wholly unsuccessful) there are significant other factors in relation to section 117(2A), which would suggest that it is appropriate to make an order in these circumstances. Mr Willa was successful in obtaining a significant sum, albeit a sum smaller than that which he sought.
The evidence before me and the findings I made concerning that clearly indicated that the husband had behaved in an inappropriate, if not improper, way and had certainly caused significant loss to Mr Willa, which was compensated by the order. His defence of the proceedings and the facts he alleged were found not to be sustainable.
I take into account in particular the provisions of section 117(2A)(c) in relation to the conduct of the parties to the proceedings referred to in the judgment.
The costs incurred by Mr Willa and Mr and Mrs Willa have been incurred in a way which can only be said to be outside the norm, to the extent that any litigant acting in a proper manner would have resolved the issues concerning Mr and Mrs Willa well before the husband did so.
The wife remained at all times willing to come to an agreement in relation to the sale of the properties and it was only the obstruction of the husband which brought about the costs in relation to the sale of the real estate.
I am therefore convinced that the order for the husband to pay the costs of Mr and Mrs Willa in both sets of proceedings is a costs order which is within the provisions of section 117(2) in that there are circumstances which justify the Court in making the order for costs. These reasons apply to the order made in relation to the husband paying Mr and Mrs Willa’s costs in both sets of proceedings before this Court.
In relation to the costs order sought by the wife, I have no difficulty in also finding significant factors in relation to section 117(2A) which would justify an order for costs, following the submissions of counsel before me today that such order should indeed operate from the commencement of the proceedings.
The most significant question is whether there should be an order for costs on the scale of costs or on the indemnity basis sought by the wife.
The provisions of section 117 must be applied by the Court. Each party is normally to bear his or her own costs of the proceedings. However, subsection (2) provides that:
If, in proceedings under this Act, the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the Court considers just.
The Court is then required to consider the matters set out in section 117(2A), when determining whether such an order should be made.
The first subsection in section 117(2A) is the financial circumstances of each of the parties.
I am obviously aware of the financial circumstances of the husband and wife as a result of the lengthy proceedings before me. To the extent that I have made findings concerning the financial circumstances of the parties, I refer to and rely upon my judgment of 19 December 2008. Orders were made that certain assets would be attributed to the wife, certain to the husband and certain adjustments made upon the sale of properties.
The wife is to retain the property at A Street, G, the proceeds of sale of D Street, a loan to BF Pty Ltd and her superannuation; in excess of $1 million. The husband was to retain assets of the known and disclosed assets of some $478,000. He was however also to retain the businesses and net assets of the group of companies, the value of which the Court was unable to determine due to the nondisclosure and general lack of cooperation by the husband.
There is obviously a significant difference therefore in the assets to be retained by the parties, if one does not include the businesses retained by the husband. It is clear that the businesses and various entities retained by the husband were continuing to trade at the time of the judgment. The husband has retained control of those and their income-producing capacity. The wife has a limited capacity to obtain income from her general employment prospects.
The financial circumstances of the parties is only one of the factors to be brought into account. In this matter, if the wife were to be successful on either a scale basis or an indemnity basis, the significant part of the monies available to the husband from the proceeds of sale would be substantially reduced if not almost entirely eliminated.
The next factor to be considered is the question of legal aid, which is not relevant in this matter.
The next factor is significant:
The conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters
This is a highly significant factor in these proceedings, both in relation to the question of costs and in relation to the question of the indemnity costs sought by the wife.
I had some hesitation initially as to whether the costs order should run from the commencement of the proceedings or rather from the commencement of the preparation for trial before me and ongoing trial.
Having heard the submissions this morning of counsel for the wife I am now convinced that the failure of the husband to approach these proceedings with appropriate honesty and disclosure of relevant matters has been a situation since the very commencement of these proceedings in 2005.
The progress of the matter indicates that the husband has not conducted himself in a way that is required to allow the Court to do justice in these proceedings. He has not provided appropriate discovery and inspection. He has not behaved in a manner which could be described as other than obstructive and delaying. This behaviour on the part of the husband continued throughout the whole period of the trial before me, when he was less than frank and less than cooperative in providing information.
As mentioned in my judgment the husband indicated at many stages that he was proposing to call certain witnesses who would support his claim but failed to do so. I accept the submissions of the wife's counsel that the wife was forced to obtain information during the process of the trial, by seeking to ask questions and by seeking to require the production of specific documents. The wife has therefore been put to excessive costs, and the matter proceeded to trial over very many days, which might not otherwise have been necessary.
The husband was on notice for a considerable period of time. The findings of the expert, were challenged on the basis that his findings were not based upon reliable background factual material and that significant issues were therefore to be determined by the Court.
Notwithstanding the notice which the husband had received, he still failed to provide appropriate documents or explanations for many of the factors necessary to value the various businesses and entities which he controlled and in particular to allow the Court to make any reliable finding concerning what he claimed were substantial debts owing by the various entities to other persons and entities.
One example of his uncooperative attitude was his assertion that he was the sole director of DT Pty Ltd, but, notwithstanding that he was the sole director of DT Pty Ltd and appeared to be involved in the day-to-day running of the business, he said he was unable to produce relevant documents and accounts.
The other factors contained in section 117(2A) which are relevant are whether any party has been wholly unsuccessful in the proceedings. This is a property settlement matter and I have made an order which provided for the husband to be allocated certain assets, but in the overall view of the matter he has been to a large extent unsuccessful in these proceedings.
I understand that there have been no offers in relation to the proceedings. That would not be surprising, bearing in mind the difficulties which the wife would have faced in formulating an offer without the necessary background information.
The summary therefore is that the financial circumstances of the parties are that the wife has a modest income, the husband has an unknown income but an obvious capacity to obtain an income due to his history of the businesses in which he has been involved. I have described the various assets to be retained by the parties so far as it relates to their financial circumstances and again refer to my judgment.
The significant factors which I have recited clearly disclose that it is not only just in all the circumstances but clearly the circumstances require and justify the Court to make an order in favour of the wife in relation to costs of these proceedings in relation to the property settlement matters.
The other factor which needs to be determined is whether those costs should be on an indemnity basis or on the scale. I have been referred to the authorities of Tetijo Holdings Pty Ltd and Keeprite Australia Pty Ltd [1991] FCA 187, an unreported Federal Court decision, Regata Developments Pty Ltd v Westpac Banking Corporation, (unreported, Federal Court of Australia, Davies J, 5 March 1993), Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 and Munday v Bowman (1997) FLC 92-784.
The Family Court has also given further consideration to the question of indemnity costs in relation to cases such as ZH & N [2005] FamCA 828 in which the Court refers to the Colgate-Palmolive Company & Anor v Cussons Pty Ltd (Supra) and other authorities. The category of cases in which an order for indemnity costs might be made is not closed.
We also now have the rules of the Family Court which refer to the Court making an order for indemnity costs. The guidance provided by the Rules also refers to the importance, complexity or difficulties of the issues, the reasonableness of each party's behaviour in the case, the rates ordinarily payable to lawyers in comparable cases, and other matters.
The Rules cannot override the Family Law Act 1975 (Cth). There are specific sections which the Court is required to take into account when making an order for costs, or indemnity costs, but the Rules perhaps provides some guidance in relation to indemnity costs. I rely upon the Family Law Act which must override and restrict the interpretation of any of the Rules. In particular, the Full Court of the Family Court has indicated, in various decisions, that costs can be made in the Family Court on an indemnity basis, but that such a step is usually considered a great departure from the normal standard. See the Full Court decision of Kohan and Kohan (1993) FLC 92-340, which was also referred to in the Full Court decision of LGM & CAM (Contempt) (2008) FLC 93-355.
The question therefore is whether this matter falls within the exception of a “very great departure from the normal standard”. Obviously the costs are significant. The wife is seeking costs which approach $300,000 and would probably come close to the amount likely to be received by the husband from the proceeds of sale of various properties, leaving him only with the businesses (value unknown) and the possible proceeds of Y Street, G.
The wife sets out in the submissions on her behalf the basis upon which the costs have been incurred. The authorities generally refer to the Court being aware of the basis for the indemnity costs and the amounts. There was an agreement, until September 2005, on a Family Law scale. Thereafter a further agreement at an hourly rate for the solicitors at $250, and from 16 October 2008 at the hourly rate of $330, with counsel fees being charged, by agreement, at $2,500 per day and $350 per hour for preparation, conferences and submissions, plus GST in both cases.
The total sum on an indemnity basis would therefore be in the region of $293,000, as indicated in the wife's counsel's submissions.
I take into account that that is a significant sum but I also take into account the various factors which relate to the question of indemnity costs which have been referred to by counsel. In particular, I am satisfied that this matter is outside the norm, and significantly outside the normal case when costs might be considered. In particular, I am satisfied that the length of the trial and the ongoing length of the proceedings before the trial were to a large extent only made necessary by the failure of the husband to provide appropriate information and by his insistence on facts which I found not to have been established, to the extent that my findings in relation to matters asserted by him were in favour of the wife. His behaviour during these proceedings therefore is one of such an exceptional nature that, to do justice to the wife, she should be able to be reimbursed the significant sums she has expended in obtaining the orders which I have made.
I am therefore satisfied that indemnity costs in this matter are appropriate.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe
Associate:
Date: 17 April 2009
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