Karlsson & Karlsson (No 2)
[2022] FedCFamC2F 1714
Federal Circuit and Family Court of Australia
(DIVISION 2)
Karlsson & Karlsson (No 2) [2022] FedCFamC2F 1714
File number(s): SYC 8036 of 2017 Judgment of: JUDGE M NEVILLE Date of judgment: 14 December 2022 Catchwords: FAMILY LAW – costs – wife’s application for indemnity costs following summary dismissal of section 79A relief – husband wholly unsuccessful – whether proceedings necessitated by failure of party to comply with court orders – where husband seeks to raise costs of proceedings in 2017 – orders made for costs in favour of the wife at scale – husband’s application for leave to extend time to seek costs refused Legislation: Family Law Act 1975 (Cth) ss 79A, 117
Family Law Rules 2004 (Cth)
Federal Circuit Court Rules 2001 (Cth) sch 1, r 21.02
Cases cited: Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Collins & Collins (1985) FLC 91-602
Cooper & Oakley (No 2) [2012] FamCAFC 187
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123
Fountain Selected Meats Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
I & I (No 2) (1995) FLC 92-625
Jensen & Jensen (1982) FLC 91-263
Karlsson & Karlsson [2018] FCCA 3483
Karlsson & Karlsson [2020] FamCAFC 207
Karlsson & Karlsson (No 2) [2020] FCCA 144
Kohan & Kohan (1993) FLC 92-340
Latoudis v Casey (1990) 170 CLR 534
Munday & Bowman (1997) FLC 92-784
Penfold v Penfold (1980) 144 CLR 311
Prantage & Prantage [2013] FamCAFC 105
Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 225
Division: Division 2 Family Law Number of paragraphs: 160 Date of last submission/s: 28 June 2021 Date of hearing: On the papers Place: Sydney Counsel for the Applicant The applicant did not appear Counsel for the Respondent The respondent did not appear ORDERS
SYC 8036 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS KARLSSON
Applicant
AND: MR KARLSSON
Respondent
INDEPENDENT CHILDREN'S LAWYER
order made by:
JUDGE M NEVILLE
DATE OF ORDER:
14 December 2022
THE COURT ORDERS THAT:
1.The husband is to pay the wife’s costs in relation to the Initiating Application filed by him on 7 June 2018 and dismissed on 29 January 2020, fixed in the amount of $27,123 to be paid from:
(a)The funds presently held on behalf of the parties in the trust account of C Lawyers; and
(b)To the extent that those funds are insufficient to satisfy the costs order, then the balance is to be paid by the husband personally.
2.In the event that the funds presently held on behalf of the parties in the trust account of C Lawyers exceed $27,123, then after that sum has been paid to the wife, the balance of the monies held on trust for the parties shall be paid to the husband.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Karlsson & Karlsson (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE M NEVILLE:
Introduction
On 7 June 2018, Mr Karlsson (“the husband”) filed an Initiating Application (“the section 79A application”) seeking to set aside an order made by consent on 4 September 2017 in property proceedings between himself and Ms Karlsson (“the wife”). On 20 January 2020, and on the wife’s application, I made orders for the summary dismissal of that Initiating Application, as well as ancillary orders dealing with funds held on trust for the parties.
The wife sought the husband pay her costs of those proceedings on an indemnity basis. The husband resisted the application.
This judgment determines the wife’s application for costs, and deals with two applications for costs made raised by the husband in written submissions provided by him on 25 June 2021.
These reasons assume familiarity with the judgment on the summary dismissal application, published under the pseudonym Karlsson & Karlsson (No 2) [2020] FCCA 144 (“the summary dismissal judgment”).
Background
At paragraphs [4] – [24] of the summary dismissal judgment, I set out the factual and procedural history between the parties, relevant to that application. I incorporate those background matters into my consideration of this application.
Beyond those matters, the following matters are relevant by way of background.
The ancillary orders made on 29 January 2020 dealt with funds held in the trust account of C Lawyers, following the sale of an investment property previously owned by the parties at Property A (“the Property A property”). In the proceedings before me, the wife had deposed – and the husband did not challenge – that there were funds of or around $65,128.08 in the trust account of the husband’s former lawyers, C Lawyers. The wife deposed that her capital gains tax liability was $37,644.16. I accepted her evidence and made orders releasing funds in that amount to her to be applied to that liability.
By operation of earlier orders, the balance of the funds held on trust should have been paid to the husband. I made an order, however, restraining the release of the balance of the funds until the wife’s application for costs – pleaded in her Amended Response and raised at the time judgment was delivered – had been determined. For reasons given on the day, the wife’s application for costs was put over to a date to be fixed.
On 26 February 2020, the husband filed a Notice of Appeal in relation to the orders made on 29 January 2020.
On 25 March 2020, the husband filed an Application in a Case seeking a stay of the orders made on 29 January 2020 that provided for the release of funds to the wife. That application was first returned before me on 3 April 2020. Because the husband’s application for leave to appeal rested – in part – on contentions of judicial bias and a denial of procedural fairness, the application was referred to another judge and it was heard and determined on 9 April 2020.
It warrants mention that whilst the s 79A proceedings and the appeal proceedings were on foot, the parties were litigating a parenting dispute which was also in my docket.[1] The parties appeared before me on 30 July 2020 in relation to the parenting proceedings. On that date, I adjourned the parenting proceedings for final hearing to commence on 25 June 2021. No action was taken in relation to the wife’s application for costs at that time, where the husband’s appeal had been heard on 25 July 2020 and judgment was reserved.
[1] The court file number allocated to the husband’s s 79A application is NCC2588/2016. The court file number allocated to the parenting proceedings is SYC8036/2017.
The husband’s application for leave to appeal was refused on 25 August 2020 and an order for costs on the appeal was made in favour of the wife: Karlsson & Karlsson [2020] FamCAFC 207.
The wife’s application for indemnity costs in relation to the section 79A application returned for directions before me on 22 October 2020. By this time, the wife’s legal representatives had withdrawn, and both parties were self-represented. I made directions for the filing and service of written submissions and a financial statement by each party, with the wife’s due by 19 November 2020 and the husband’s by 17 December 2020.
The wife forwarded her submissions on 20 November 2020, having foreshadowed she would be delayed by one day. That delay was of no consequence. Whilst the wife did not file a Financial Statement, she set out her financial circumstances in some detail in those submissions.
On 30 December 2020, during the court’s Christmas shutdown period, the husband wrote to my Associate outlining circumstances that had precluded him from preparing his costs submissions in accordance with the directions. On 14 January 2021, my Associate e-mailed the husband to inform him that I had extended time for him to file his submissions to 22 January 2021.
On review of the wife’s costs submissions, it became apparent that the wife contended that written offers had been exchanged between the parties about both parenting and property issues. She submitted copies of the correspondence that had passed between the parties in this regard. Because the parenting proceedings remained extant before me, I deferred reading the documents submitted by the wife until I had determined the parenting application.
As the parenting hearing drew close, it became apparent that the husband had not provided his costs submissions. On 11 June 2021, my Associate again e-mailed the husband enquiring about his submissions and requesting they be provided by 15 June 2021. At the husband’s request, time was extended to 18 June 2021.
On 23 June 2021, the husband e-mailed my Associate foreshadowing that his costs submissions would be provided in advance of the final hearing. On 25 June 2021, my chambers received the husband’s submissions by e-mail.
On 28 June 2021, the husband sent a further e-mail to my chambers attaching documents that he had omitted, in error, from the e-mail he sent on 25 June 2021 and making brief submissions in relation to them. He requested I have regard to those documents when determining the costs application. Those documents comprised e-mail communication between the husband and a finance broker which, he contended, confirmed loan approval on 7 September 2017; e-mails to and from real estate agents who had prepared valuations the husband had relied upon in the section 79A proceedings; and a Financial Statement that appears never to have been filed. Whilst these further documents were clearly out of time, I determined to have regard to them in my consideration of the costs issue.
Applicable law and principles
Section 117(1) provides that each party to proceedings under the Family Law Act 1975 (Cth) (“the Act”) shall bear his or her own costs, subject to the provisions of (relevantly) s 117(2).
Section 117(2) allows the court to make such order for costs as the court considers just if the court is of the opinion that there are circumstances that justify it in doing so. This extends to making an order for costs on an indemnity basis.
When considering what order – if any – is to be made as to costs, the court is to have regard to the matters set out at s 117(2A).
Before considering the factors set out at s 117(2A) of the Act, it is useful to observe the following principles in relation to applications such as this:
(a)The court does not need to be satisfied that there special circumstances, an exceptional case or otherwise a “clear case” for the making of costs order. A finding of justifying circumstances is, however, an essential preliminary to the making of a costs order: Penfold v Penfold (1980) 144 CLR 311; Jensen & Jensen (1982) FLC 91-263.
(b)The court’s discretion in relation to the issue of costs is broad: Collins & Collins (1985) FLC 91-602.
(c)The weight to be given to a particular matter under s 117(2A) falls within the court’s discretion. There is no requirement under s 117 that one factor must be present before an order for costs is made, nor that one factor be of comparative weight to the other factors set out at s 117(2A). There is nothing to prevent one factor from being the sole foundation for an order for costs, nor to prevent one factor from being determinative of the application for costs: Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) v Fish and Another (2005) 33 Fam LR 123.
(d)Notwithstanding the court’s discretion as to the weight to be given to each of the factors at s 117(2A), all of the factors must be taken into account and balanced in order to determine whether the overall circumstances justify the making of an order for costs: I & I (No 2) (1995) FLC 92-625.
(e)Costs are not to be awarded by way of punishment of the unsuccessful party. Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which they have been put by reason of the legal proceedings: Latoudis v Casey (1990) 170 CLR 534.
Where costs are sought on an indemnity basis, additional considerations arise. In Kohan & Kohan (1993) FLC 92-340 the Full Court observed the following matters:
(a)In an appropriate case, the Court has a discretion to order costs on an indemnity basis and such costs may be ordered where they have been incurred under a costs agreement which departs from the usual scale of costs;
(b)It is fundamental to the exercise of the discretion to order indemnity costs that the trial judge should understand that such an order is a very great departure from the normal standard;
(c)It is also fundamental to the exercise of the discretion that the trial judge know what the terms of the costs agreement are, the extent to which it exceeds the scale costs and what its likely impact will be on the financial position of each of the parties.
(d)The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
(e)Insofar as an offer of compromise not accepted is better than what was ultimately ordered, the general practice in the family law jurisdiction has been to order no more than costs on a party and party basis.
(f)A party who enters into a costs agreement should, if properly advised, contemplate that they might have to bear their own costs, and that even if they succeed in the litigation and obtain an order for costs, they should not expect to receive an award of costs on an indemnity basis. A party, so advised, must therefore have been prepared to assume those risks upon entering into the costs agreement.
Further guidance can be found in the decision of the Full Court in Prantage & Prantage [2013] FamCAFC 105 from which the following principles can be gleaned:
(a)The term “indemnity costs” is understood to be an entitlement to costs, including under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.
(b)Imprudence by a party in their “approach” such as the refusal of an offer to compromise is not sufficient in and of itself to enliven the power to award indemnity costs, although it may provide a basis for a costs order.
(c)There is no rule that indemnity costs will be ordered where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.
In Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 at page 233 (“Colgate-Palmolive”) Shepherd J, having considered the earlier authorities on the issue of indemnity costs said that there should be some “special or unusual feature in the case to justify the Court in departing from the ordinary practice.”
In Munday & Bowman (1997) FLC 92-784 Holden CJ referred to various examples of circumstances which might justify a departure from the general principles discussed by Shepherd J in Colgate-Palmolive as follows:
(a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397)
(b)Making allegations of fraud, knowing them to be false, and the making of the relevant allegations of fraud (see Fountain Selected Meats Pty Ltd (supra)).
(c)Evidence of particular misconduct causing loss of time to the Court and to other parties (see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 225).
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115).
(e)An imprudent refusal of an offer to compromise.
material relied upon
In determining this application, I read and had regard to the following documents:
(a)Wife’s written submissions, 20 November 2020.
(b)Wife’s bundle of supporting documents, comprising:
(i)Wife’s costs agreement with Mills Oakley, 21 June 2017;
(ii)Itemised statement of professional fees and disbursements for the period 11 June 2018 to 25 June 2018, issued (inferentially) by Mills Oakley to the wife;
(iii)Wife’s costs agreement with Barkus Doolan, 18 September 2018;
(iv)Counsel’s fee disclosure, 22 July 2019;
(v)Itemised schedule of professional fees and disbursements; tax invoices; and trust account statements for the period 14 January 2019 to 29 January 2020, issued (inferentially) by Barkus Doolan (including counsel’s fees of $14,960 incl GST);
(vi)Offers of settlement exchanged between the parties’ solicitors and, or the wife’s solicitor and the husband during the period 21 March 2019 to 20 September 2019.
(c)Husband’s written submissions, 25 June 2021.
(d)Annexures to the husband’s written submissions comprising:
(i)Offers of settlement exchanged between the parties’ solicitors and, later, when the husband was self-represented, between him and the wife’s solicitor, during the period 21 March 2019 to 3 September 2019.
(ii)Correspondence between the parties’ solicitors and, later, when the husband was self-represented, between him and the wife’s solicitor, concerning preparation for final hearing;
(iii)Schedule of the husband’s legal costs.
(e)Husband’s e-mail, incorporating further brief submissions and attaching documents, sent 28 June 2021.
(f)Documents annexed to husband’s e-mail sent 28 June 2021, namely:
(i)Financial Statement;
(ii)E-mail from Mr V, 7 September 2017; and
(iii)E-mails exchanged between the husband and two real estate agents in August 2017 in relation to market appraisals of the Property A property.
The Section 117(2A) factors
The parties’ financial circumstances
The wife
The wife did not file a Financial Statement, although, in her written submissions she set out the information that would otherwise have been contained within a Financial Statement, including an itemised breakdown of her expenditure.
The wife is in full time employment as a consultant, earning annual income of $105,000. She owns a property at Property A, the value of which she estimates is $600,000, and over which there is a mortgage of $255,000. She has cash at bank of $34,000 and superannuation of $375,000.
She has care of the parties’ three children, the oldest of whom turned 18 years old in 2022. She receives child support of $50 per month (equivalent to $11.50 each week) and otherwise she has met and continues to meet the costs of the children’s school fees, which she estimates are $10,000 each year; the children’s extra-curricular activities, which she estimates are $10,000 each year; and the children’s school related expenses, which she estimates at $5,000 each year. These expenses will have reduced now that the oldest child is 18 years old.
She has monthly household expenses of $2,820 (equivalent to $650 per week). This amount does not include mortgage repayments.
The husband submitted that the wife’s property – purchased with funds she received from the property settlement that occurred in 2016 – is presently valued at $880,000. He contends that the wife received sufficient funds in the property settlement to purchase that property outright, and queries why she would claim a mortgage in respect of it. He submitted that this causes him to believe that the wife has undisclosed assets of around $250,000. He made no further submission about his belief in that regard or the basis for it, saying only that he will be pursuing the matter in “upcoming proceedings”. There is no evidence that enables me to understand the basis for the husband’s beliefs about these matters.
The husband
The husband submitted that his financial circumstances are impecunious and he blames the wife’s conduct in selling the Property A property and the way in which she has conducted the entirety of the legal proceedings, for his circumstances. He contends that she sold the property in breach of the orders of 4 September 2017 and that she unlawfully retained funds of more than $200,000 due to him from the sale for an unreasonable period. He contends that had he had retained the Property A property – as envisaged under the orders of 29 June 2016 and 23 February 2017 – it would be valued today at $950,000 and he would not be required to pay yearly rental costs in excess of $20,000.
The husband’s submissions at this point fail to recognise:
(a)His receipt of the Property A property was contingent upon him raising finance to discharge the mortgage over in or around June 2016. He had not raised the necessary finance by the time contracts were exchanged on the property in July 2017. To the extent that the property may have increased in value to $950,000 in the years that have passed since its sale, that does not alter the fact that he was not in a position to raise the finance necessary to have retained it for over 12 months after the orders of 29 June 2016 required him to do so; and
(b)Whilst, if he had raised the necessary finance and retained the property, he would not have rental costs today, he would have had the costs of servicing the loan in any event.
By reference to the husband’s Financial Statement, the husband receives no income. He has weekly expenditure (including rent) of $780 each week. Of this amount, $10 is paid by way of child support. He has assets valued at $10,300 (including cash at bank of $250); and liabilities of $78,000 (comprising a company tax debt of $55,000; and a line of credit with Westpac Bank of $23,000). He has superannuation valued at $100,000.
There is one other income earner in the husband’s household – his partner – who receives income of approximately $600 per week. I am unaware of the source of her income or her financial circumstances beyond this.
The husband is qualified as a professional and is self-employed, working through the company W Pty Ltd. He states that the value of his interest in that company is nil.
The husband submitted that he had operated that company from the Property A property, and that the sale of the property and the wife’s “unlawful retention” of the proceeds of sale had prevented him from securing a permanent alternative. The husband submitted that COVID-19 travel restrictions hampered his earning ability.
The wife submitted that when the issue of costs was raised during the appeal proceedings, the husband informed the court that he had cash of $1,500; a car valued at $5,000; superannuation of approximately $200,000; approximately $28,000 in his former solicitor’s controlled money account; and a debt to the ATO of $50,000.
An order for costs in the fixed sum of $5,672 was made in favour of the wife against the husband in the appeal proceedings, to be paid to the wife directly from the funds held in the controlled money account by C Lawyers and be paid before any payment out of those funds to the husband.
Receipt of legal aid
Neither party was in receipt of a grant of legal aid.
The conduct of the parties to the proceedings
The wife made no specific submission in relation to the conduct of the parties to the proceedings.
The husband submitted that the court should have regard to the parties’ conduct throughout the entirety of their litigation against each other, going back to June 2016 when the parties first entered into consent property settlement orders. He contended that the wife had been litigious, uncompromising and represented by lawyers who repeatedly made a mockery of their obligations to the court.
Insofar as the husband seeks consideration of the parties’ conduct throughout the entirety of their litigation, he sets out the specific aspects of the wife’s conduct that he contends were wanting at paragraphs seven to nine of his written submissions. Many of those matters were addressed in the summary dismissal judgment, specifically the contentions that:
(a)The wife’s section 79A application filed 23 September 2016 was “malicious, without basis or prospect of success and fraudulent” and withdrawn the day before the matter was before the court.
(b)The wife’s application for enforcement orders in January 2017 left the husband with insufficient time to obtain legal advice before it was returned on 23 February 2017.
(c)The wife’s urgent application for orders that a Registrar sign the necessary documents to effect a transfer of the Property A property, determined by Judge Henderson (as her Honour then was) on 20 July 2017, was prosecuted by the wife in circumstances where the wife knew he could not be before the court, the application was not urgent, and the wife had failed to make the full and frank disclosure to the court that is required where an application is made to proceed ex parte.
(d)By selling the Property A property, the wife acted contrary to the orders of 23 February 2017.
(e)The wife had failed to make proper disclosure and had failed to comply with the orders of 4 September 2017 requiring her to obtain a calculation of her capital gains tax liability. I note that the husband raised this contention again later in his submissions, and it will be discussed in further detail later in these reasons.
(f)The wife refused his repeated requests to allow him time to refinance before selling the Property A property; she refused to sign necessary documents; she refused to withdraw the property from sale in breach of orders; and she sold the property under market value in breach of court orders in a “contrived sale process”.
For the reasons given in the summary dismissal judgment, I did not accept the husband’s contentions as set out above. The conclusions I reached about the above matters were not disturbed by the Full Court.
In addition to the above matters, the husband submitted that on 29 August 2017, the wife arranged and provided access to removalists to steal his property, possessions and vehicles, despite multiple warnings by him and an undertaking given by her that she would not do so. I observe that on 20 July 2017, the orders made by Judge Henderson included an order that a warrant for possession of the Property A property issue in favour of the wife or an enforcement officer, at her election. If the wife gave an undertaking not to remove the husband’s property, it was not before me in the evidence.
The husband submitted that the wife filed an application for parenting orders in December 2017, having refused to consider a parenting plan he had proposed in August 2016; refusing to engage in family dispute resolution with him; and refusing to discuss parenting matters or to facilitate time or contact with the children. For the reasons given in the parenting matter, I considered that each party had acted in ways that had precluded agreement being reached between them at or around that time.
The husband contended the wife’s conduct was wanting in relation to an application she made for costs in May 2018, during the course of which – he contends – she sought changes to the capital gains tax payable by him in accordance with the 4 September 2017 orders, and an order for security for costs. He contends that in November 2018, Judge Henderson allowed limited costs and made certain findings. The court file reveals that on 9 November 2018, a costs order was made against the husband in favour of the wife in the sum of $7,400, plus filing fees and counsel’s fees for the costs application.
The husband submitted that her Honour’s judgment on the wife’s costs application was critical of the wife and that her Honour found that the wife should have allowed the husband to refinance once approval was received and that she should not have sold the property. Her Honour’s judgment in the matter is published as Karlsson & Karlsson [2018] FCCA 3483.
When regard is had to her Honour’s judgment, it is correct that she had some criticism of the wife’s refusal to defer sale of the property, however, that was not the extent of her commentary. Her Honour said:
[44] So what the husband offered to do on 19 July 2017 is, “I have a conditional notice of approval for refinance from [Bank]. Let me take this property over”, was an offer by him which the wife, as I see the evidence, imprudently refused to accept. The husband made an offer to the wife, which she simply rejected, and, for that reason alone, there being no misconduct by the husband, as such, prolonging the litigation, rather, if I could use this word, a slackness by him in getting his finances in order, I see the wife was imprudent to reject that offer.
[45] Further, I am not entirely certain that had I had all these facts now known to me and presented to me on 20 July 2017, I would have made the orders sought by the wife. However, that may be otiose reasoning. However, the father failed to comply with two sets of Consent Orders. His offer to settle was very late in the proceedings, some 15 months almost after the original orders were made.
It is clear that whist her Honour was concerned about the wife’s actions, she was also concerned about the husband’s delay in securing finance.
Further, to the extent that the husband contends that her Honour refused the capital gains tax relief sought by the wife thereby enlivening his entitlement to the funds held in the trust account of C Lawyers, I could find no reference to the capital gains tax issue in her Honour’s judgment, and the orders of 4 September 2017 remained undisturbed by her Honour’s orders.
At paragraph 10 of his written submissions, the husband set out the correspondence exchanged between the parties throughout 2019 in relation to the proposed settlement of both the section 79A application and the parenting proceedings. He contended that the wife failed to respond to his communications in a timely fashion or – in some instances – at all; that her written offers represented no compromise on her behalf; and that the information she provided to him in support of her contentions about her capital gains tax liability was replete with material errors.
The written offers made by each party will be discussed in more detail later in these reasons. Suffice to say for present purposes, I am satisfied that:
(a)The husband made a written offer to the wife on 21 March 2019 offering to resolve both the parenting and property matters. From the terms of the letter, resolution of one was contingent on resolution of the other.
(b)The wife responded to the offer made by the husband in relation to the parenting matter on 28 March 2021. Her response did not address the property issue. This was appropriate in the circumstances.
(c)On 22 August 2019, the husband accepted a parenting proposal earlier made by the wife, and otherwise made a further written offer in relation to the section 79A application.
(d)On 29 August 2019, the wife’s solicitor wrote to the husband’s solicitor to advise that the wife did not consent to the husband’s request for an extension of time to file his affidavit.
(e)By letter of 3 September 2019, the wife rejected the husband’s offer and made a counter proposal. After the husband’s former lawyer ceased to act for him, that letter was sent directly to the husband on 20 September 2019.
(f)On 27 September 2019 the husband wrote to the wife’s former solicitor taking issue with the way in which the wife had estimated the capital gains tax liability and seeking particulars so as to be in a position to consider the wife’s counter proposal. There is no evidence of a reply to this letter.
(g)On 4 October 2019, the husband wrote to the wife’s former solicitor seeking a reply to the correspondence sent 27 September 2017. There is no evidence of a reply to this letter.
Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court
The husband’s submissions on this matter appear at paragraphs 12 to 16 of his written submissions. He contends that the wife breached multiple orders which necessitated the section 79A application.
Alleged breaches of the June 2016 and February 2017 orders
The husband contends that the wife committed multiple breaches of the consent orders made on 29 June 2016 and 23 February 2017 and that these breaches contributed to the necessity of the application for section 79A relief. The husband’s contentions, in effect, seek to re-agitate the arguments he advanced at final hearing, namely that the wife’s conduct prior to 4 September 2017 infected the orders that were ultimately made by consent on that date.
For the reasons given in the summary dismissal judgment, I did not accept the husband’s contentions at hearing. The husband’s costs submissions and the documents he relied on in support do not cause me to alter my view.
Even if, however, I am wrong in that regard and even if the wife was in breach of the orders of 29 June 2016, the husband had ample opportunity to bring enforcement proceedings or to raise those matters before entering into further consent orders on 23 February 2017. Even if the wife was in breach of the orders of 29 June 2016 and the orders of 23 February 2017, again, he had ample opportunity to bring enforcement proceedings or to raise those matters before entering into further consent orders on 4 September 2017. I do not, therefore, accept that the wife’s conduct under the orders of 29 June 2016 or 23 February 2017 gave rise to a need for the husband to commence the section 79A application.
Alleged breaches of the September 2017 orders
To the extent that the husband contends that the wife was in breach of the orders of 4 September 2017 such that it gave rise to the need to bring the section 79A application, some consideration of those orders is required.
The orders of 23 February 2017 provided, relevantly, that the proceeds of the sale of the Property A property were to be applied to the various costs associated with the sale; the discharge of the mortgage; and various rates adjustment. Thereafter, the wife was to receive funds to compensate her for any costs incurred in attending to those payments; and thereafter, the husband was to receive the balance of the proceeds of sale.
Order 6(a) of the orders made on 4 September 2017 (which is the order the husband sought to have set aside) had the effect of varying the orders of 23 February 2017, so that in addition to the funds to be received by the wife, she would also receive:
the amount of any tax liability attaching to the Applicant Wife, arising from her interest in [Property A] including but not limited to tax on the capital gain on [Property A] with such capital gain to be determined by [Mr G] (sic), accountant acting on the Wife’s instructions PROVIDED THAT the Husband is provided with full access to the communications regarding the determination by [Mr G] (sic) AND IN THE EVENT the Husband has a concern about the capital gain determination he has liberty to re-list on 28 days' notice.
The husband summarised the intended operation of that order as requiring the wife to “obtain an estimate of her CGT liability from Mr G accountant, disclosing all data and instructions issued to the accountant to the husband, and allowing the husband to appeal any errors within 28 days”.[2] I do not consider that summary accurately describes the purpose of the grant of leave to re-list on 28 days’ notice.
[2] Husband’s submissions, 25/06/2021: [16(c)].
As I understand the husband’s contentions, the wife was in breach of the orders of 4 September 2017 because:
(a)She delayed in initiating contact with the accountant and failed to provide sufficient or accurate information.
(b)From March 2018, the wife made no attempt to identify an alternative accountant (where Mr G retired in January 2018).
(c)Two years following settlement, the wife obtained a capital gains tax estimate from her accountant without consulting the husband.
Delay in contacting the accountant and difficulties with the information provided
The husband contends that because the orders did not specify a date by which the wife was to obtain the accountant’s advice, it was to be obtained “as soon as possible” under the Rules. I could find no reference in either the Family Law Rules or the Federal Circuit Court Rules that were operative at the relevant time to support the husband’s contention.
Even if I am wrong about that, however:
(a)The wife had already commenced to seek a capital gains tax determination prior to the consent orders of 4 September 2017, although not, apparently, from Mr G. For the reasons given in the summary dismissal judgment, I am satisfied that she had done so and had informed the husband of this, by reference to her affidavit, filed 1 September 2017.
(b)As set out in the summary dismissal judgment:
(i)The wife provided a copy of her application to the ATO for a private ruling to the husband through their respective lawyers on 13 September 2017;
(ii)Mr G sent the husband an e-mail with an estimate of the capital gains tax liability on 13 September 2017, less than two weeks after the date on which the consent orders had been entered into by the parties;
(iii)On 18 September 2017, the wife received the ATO’s private ruling, informing her that she would not be exempt from capital gains tax. A copy of the private ruling was sent to the husband on 20 September 2017, again through the parties’ respective lawyers;
(iv)On 30 October 2017, Mr G e-mailed the husband with an estimate that capital gains tax of $34,271 would be payable. He sent that e-mail inviting the husband’s comment before forwarding it to the wife’s solicitor.
In addition to the above matters, and because it is raised in the husband’s costs submissions, the following matters appear in the evidence that was before me at hearing:
(a)The capital gains tax estimate provided by Mr G to the husband on 13 September 2017 was clearly based on information provided to Mr G by the husband.[3] It cannot, in the circumstances, have been considered to have been an accurate assessment.
(b)The wife deposed that she instructed her solicitor to write to Mr G seeking a capital gains tax calculation on 18 September 2017. The letter sent included a copy of the ATO’s private ruling, received by the wife on 13 September 2017. The husband’s solicitor was provided with a copy of that letter.
[3] Wife’s affidavit, 18/10/2019: Ann W30.
To the extent the wife waited for a period of 13 days to contact Mr G, I do not consider that timeframe to have been unreasonable. It enabled her to receive the ATO private ruling and provide it to Mr G.
Insofar as the husband contends that inaccurate information was provided by the wife to Mr G, given that he had full access to communications with Mr G, he could have taken steps to bring any inaccuracies to Mr G’s attention either by raising it with the wife’s solicitor, or by contacting Mr G directly as he appears to have done on or around 13 September 2017. Should he have found either the solicitor or Mr G non-responsive, he could have re-listed the matter to raise his concerns.
The husband also complains that additional information sought by the accountant was not provided and that the wife did not follow up with the accountant for six months, by which time he had retired and was unable to complete the work. The wife does not accept his contentions.
In his affidavit, the husband annexed a copy of an e-mail sent by Mr G to the wife and her solicitor on 19 October 2017.[4] That e-mail said:
…
…To complete the calculation of Capital Gains…would you kindly supply:
1.Invoice from Mills Oakley for $4,026.98 on settlement date of 18/09/2017.
2.[The wife’s] invoice/s totalling $43,500 for legal services.
The relevant invoice/s required are those pertaining to the Capital costs of preserving or defending the title of [the property]. Example of relevant costs would be stamp duty/title transfer costs, etc. Costs relating to Divorce/Family Law proceedings aren’t relevant.
[4][4] Husband’s affidavit, 25/09/2019: Ann -16, pp. 90 – 92.
The wife’s solicitor forwarded that e-mail to the husband’s solicitor on 20 October 2017.
On 23 October 2017, the wife’s solicitor replied to Mr G, copied by e-mail to the husband’s solicitor, enclosing a copy of the tax invoice issued to the wife in relation to the conveyancing costs of the sale, a copy of the settlement sheet, and otherwise requesting particulars concerning the invoices totalling $43,500 for legal services. To the extent the husband contended in his affidavit that by her letter, the wife’s solicitor had “refused to provide a breakdown of $43,000 of legal costs”[5], it is an incorrect characterisation of the letter sent by the wife’s lawyer.
[5] Husband’s affidavit, 25/09/2019: [95].
If Mr G provided the particulars, there is no evidence of it in either party’s affidavit.
As discussed in the summary dismissal judgment, on 30 October 2017, Mr G drafted a letter to the wife’s lawyers estimating a capital gains tax liability of $34,271. On that same date, he provided the draft to the husband by email inviting his comment prior to forwarding it to the wife’s solicitors.
The wife deposed that she had heard nothing from Mr G by 30 January 2018 and so instructed her solicitor to write to him. On 31 January 2018, Mr G sent an email to the wife informing her, inter alia:
(a)He had sent a draft on the capital gain issue to the husband on 13 September 2017;
(b)He had not had contact from the husband after that date.
(c)He is retiring and will not act for either the husband or the wife from the date of the email.
The husband gave no evidence of having made contact with Mr G after 13 September 2017, and he gave no evidence of having made any comment on the draft letter to the wife’s solicitor sent on 30 October 2017. I infer from the history of the parties’ respective communications with Mr G and his with each of them, that the draft letter of 30 October 2017 was not sent to the wife, in the absence of comment or communication from the husband.
Having regard to these matters, I cannot accept the contention that the wife was in breach of orders by failing to provide accurate information or to respond to Mr G’s request for further information; nor that she frustrated the process of obtaining that advice; nor that she acted unreasonably in wishing to delay release of funds where she had not received advice about the extent of the capital gains tax liability.
Whilst I am not satisfied that the wife was, in fact, in breach of the orders of 4 September 2017 in relation to seeking a capital gains tax determination as the husband contends, even if she were, given the husband’s concerns, his remedy was to take advantage of the liberty to re-list the matter. Where he did not do so, I cannot now accept his contention that the above matters give rise to a necessity to commence the section 79A application.
Failure to consult the husband prior to obtaining a capital gains tax estimate from the wife’s accountant and failure to attempt to agree an alternate accountant
The orders of 4 September 2017 required the wife to obtain a capital gains tax estimate from Mr G, but they did not preclude her from seeking a capital gains estimate from an accountant other than Mr G. To the extent she chose to do so, at any time, she was free to do so.
The orders of 4 September 2017 did not require either party to attempt to agree upon an alternate accountant in the event that Mr G became unable or unwilling to act. Even if they did, however, the husband adduced no evidence of having proposed an alternate accountant or seeking the wife’s agreement in the circumstances. Where an impasse was clearly reached following Mr G’s retirement, I cannot see that either party took steps to propose an alternate accountant.
Otherwise, to the extent that the wife had a capital gains tax liability, it crystallised on the filing of her tax return for the financial year ending 30 June 2018. Whilst the calculation was undertaken by the wife’s accountant, it was ultimately determined by the ATO.
Conclusion
I am not satisfied that the section 79A application was necessitated by any breach of orders by the wife.
Whether any party to the proceedings has been wholly unsuccessful
Where the Initiating Application was summarily dismissed, the husband has been wholly unsuccessful in the proceedings.
In his submissions of 25 June 2021, the husband contended that notwithstanding that he had been wholly unsuccessful, there had been serious and fatal defects in both procedural fairness and the findings in the summary dismissal judgment. These matters were ventilated, unsuccessfully, on his application for leave to appeal. Insofar as the submissions made at paragraphs 18 to 27 of the husband’s submissions engage with and comment on various paragraphs of the summary dismissal judgment, those paragraphs seek, in effect to traverse the findings made and, as such, they are not relevant to the determination of this costs application.
Whether a party to the proceedings has made an offer in writing
Written offers of settlement were exchanged between the parties prior to the final hearing.
On 21 March 2019, the husband’s former solicitor wrote to the wife’s solicitor offering to settle both the section 79A proceedings and the parenting proceedings. Relevantly for present purposes, the husband’s proposal was that the wife retain the capital gains tax liability arising from the sale of the Property A property. There was no suggestion that the section 79A application would be withdrawn. Rather, it appears that “in consideration for” the concessions the husband was clearly making in the parenting proceedings, the husband proposed that the wife bear the capital gains tax liability herself, in effect, reverting to the position the parties would have been in under the consent orders of 23 February 2017.
On 28 March 2021, the wife’s solicitor wrote to the husband’s former solicitor making a counter offer of settlement in relation to the parenting proceedings and enclosing draft consent orders. No response was made to the offer made to the husband’s proposal about the disposition of the section 79A application. It is clear from the letters of 22 March 2019 and 28 March 2019 that the wife sought orders to facilitate overseas travel with the children, which had not featured in the husband’s offer.
On 22 August 2019, less than two months before the hearing date, the husband’s solicitor wrote to the wife’s solicitor about the resolution of both parenting and property issues. The solicitor confirmed that subject to the views of the Independent Children’s Lawyer, the husband accepted draft parenting orders apparently circulated at an earlier point. In relation to the section 79A application he proposed:
(a)That of the funds held on trust for the parties, a sum of $17,135.50 be released immediately to the wife, being 50 per cent of the capital gains tax calculated by Mr G;
(b)The balance of the funds (inferentially the sum of or around $48,000) be immediately released to the husband; and
(c)The husband’s section 79A application be withdrawn and dismissed with each party to pay their own costs of and incidental to the proceedings.
Where Mr G had calculated the wife’s capital gains tax liability as $34,271, the husband’s proposal would have left her worse off than she would have been under the orders of 4 September 2017.
On 3 September 2019, the wife’s solicitor wrote to the husband’s former solicitor rejecting the offer made on 22 August 2019. The wife’s response advised that after she had received the husband’s offer, she had received advice that her capital gains tax liability would likely be $37,000 and that she intended to lodge her taxation return so that the liability would crystallise forthwith. The wife made a counter proposal for settlement as follows:
(a)A copy of the wife’s tax return as lodged and the Notice of Assessment (once received) be provided to the husband as evidence of the actual capital gains tax liability;
(b)Not later than two business days from the provision of those documents to the husband, each party do all acts and things necessary to cause the payment of the capital gains tax liability from the funds held on trust;
(c)The husband retain and the wife have no right, title or interest in the balance of funds in the trust account after payment of the capital gains tax liability;
(d)The section 79A application be withdrawn and dismissed, with each party to bear their own costs.
But for the issue of costs, the wife’s counter proposal maintained the arrangements under the orders of 23 February 2017 and 4 September 2017. The wife’s solicitor’s letter reiterated the wife’s contention that the husband’s application was doomed to fail, and foreshadowed that should the husband pursue – and not succeed on – his application, she would seek indemnity costs.
On 20 September 2019, following the husband’s former solicitor having filed and served a Notice of Withdrawal, the wife’s solicitor wrote directly to the husband, enclosing a copy of the letter sent on 3 September 2019.
On 27 September 2017, the husband wrote to the wife’s former solicitor taking issue with the way in which the wife had estimated the capital gains tax liability and seeking particulars so as to be in a position to consider the wife’s counter proposal.
On 4 October 2019, the husband wrote to the wife’s former solicitor seeking a reply to the correspondence sent 27 September 2017. There is no evidence of communication between the parties on the issue of settling the section 79A proceedings after this date.
Having had the benefit of reviewing the written settlement offers exchanged between the parties, I do not consider that the engagement of the wife’s lawyers was – as the husband contends – “meaningless”. It is clear that each party’s legal representatives were trying to resolve both parenting and property matters. I am satisfied that – at least as at March 2019 – the husband’s offer in relation to the parenting matter was contingent upon the wife accepting his offer on the section 79A application. The message conveyed by the husband’s offer was that the wife could have what she wanted in relation to the parenting proceedings, if he could have what he wanted in relation to the property proceedings. Where the wife wished to agitate the issue of travel in relation to the parenting orders, she could not respond to the husband’s proposal to resolve the section 79A application.
As matters unfolded, the parenting matter did not resolve and the section 79A application was determined on terms equivalent to those proposed by the wife in her solicitor’s letter of 3 September 2019.
Any other matter the court considers relevant
The wife made no submission that there were any other relevant matters to be taken into account.
The husband contended that there were a number of other relevant matters, namely:
(a)The wife’s legal fees are unreasonable, inflated by her “litigious, unrelenting and uncompromising conduct and approach” and specifically:
(i)The wife’s issue of a subpoena for production of the legal file of the husband’s former solicitor was an “opportunistic fishing expedition” designed to cause him confusion, stress, cost and workload and to derail his preparation for hearing. He described the actions of the wife’s former solicitor as “unconscionable”.
(ii)The invoices for legal fees issued to the wife show that she engaged counsel on the day she was served with the husband’s Initiating Application, which is inconsistent with the actions of a person who considers that there is no genuine case to meet, and can only be an attempt to intimidate the husband.
(b)Counsel for the wife mislead the court by misstating the nature of the case and should, therefore, be referred for disciplinary action; and that I ignored the husband’s submissions as to the nature of the case he was advancing, preferring, instead to adopt the misleading submission of counsel for the wife.
(c)Judicial bias.
The subpoena issued for the husband’s legal file
On 3 October 2019, a subpoena for production was issued at the request of the wife to the husband’s former solicitor for the husband’s legal file. The husband filed a Notice of Objection to the subpoena on 14 October 2019.
The husband’s written settlement offer of 21 March 2019 contained the following comment by his former solicitor:
As foreshadowed during the mention this morning, having carefully considered the evidence that will be required to be presented to the court to support each of our client’s cases, the negotiations leading up to the entering into of the Orders being sought to be set aside by my client are critical. In that regard, it is my strong view that your client’s counsel…as well as my client’s counsel…and I will be required to give evidence. Likewise, [the wife’s solicitor] and her former colleague from [the law firm previously representing the wife] who provided the taxation advise to your client in relation to the CGT liability are also critical witnesses.
That letter identifies that the husband considered the legal advice given to the parties and the instructions each provided to their respective lawyers were relevant to the issues in dispute and would be ventilated at the hearing. I do not accept, therefore, that the subpoena for production was a fishing expedition.
The wife’s actions in engaging counsel immediately on service of the application
Before considering the husband’s submissions, it warrants mention that the wife was represented by Mills Oakley from 21 June 2017 until 18 September 2018, when she engaged Barkus Doolan.
The invoices submitted by the wife inform that Mills Oakley commenced work on the application on 11 June 2018 and, on that same date, drafted a letter to counsel. Ultimately, different counsel was briefed to appear on the application after the wife had retained Barkus Doolan. The wife does not seek costs of any work undertaken by the first counsel.
To the extent the husband contended that Mr Levy of counsel, who appeared on the summary dismissal application, was briefed on the day the wife was served with the application, the invoices submitted by the wife do not bear out that contention and inform that he provided his costs disclosure to the wife’s solicitor on 22 July 2019.
The Initiating Application filed by the husband had been prepared by a solicitor. To the extent the husband contended that the wife’s actions in engaging legal representatives promptly was designed to intimidate him, I cannot accept that that was her motivation for doing so. She was entitled to seek legal advice and representation, just as he had done.
Having regard to the history of litigation between the parties, I do not consider it was unreasonable for the wife to have sought legal advice from her solicitor immediately. Nor do I consider it unreasonable or unusual that counsel’s advice was sought promptly, and that when the wife changed solicitors, counsel was obtained to advise and appear at the hearing.
Counsel’s comments about the nature of the case
The husband contended that during the summary dismissal hearing, counsel for the wife submitted that the case was about $3,000 – effectively because Mr G had estimated the capital gains tax liability to be $34,000 and the wife had had subsequent advice that it would be $37,000. The husband included an extract of the transcript in his written submissions of counsel’s comments.
The husband contended that the application was, in fact, about $65,000, being the funds that sat in the trust account of C Lawyers.
As I understand the husband’s contentions:
(a)If counsel’s submission was genuine, then the court must have regard to the proportionality of costs; and
(b)If it was not genuine, counsel should be disciplined for misleading the court.
The husband further contended that counsel’s submission was – inferentially – accepted by me at face value; and that the husband’s submission that the case was about $65,000 was ignored.
In relation to counsel’s submissions, it is clear from the transcript that the controversial comments were made when I was still in the process of trying to determine the application to be run that day. I had not commenced to hear submissions on the summary dismissal application at that point, and I had understood counsel’s submissions to be outlining the case from the wife’s perspective.
It was clear throughout the hearing that the husband contended that the sum of $65,000 was at issue, contrary to counsel’s comments. After submissions commenced on the summary dismissal application, the husband replied to and corrected counsel’s comments, stating “we are arguing over $65,000”.[6]
[6] Transcript, 29/10/2019: p. 40: 38 – 40.
In the ultimate outcome, however, it was clear that the application before the court was not that capital gains tax of $34,000 or $37,000 should be paid from the funds in the solicitor’s trust account, nor whether the husband should receive the entirety of the funds in the solicitor’s trust account of $65,000. The inquiry on the day of hearing was whether the husband’s evidence, taken at its highest, demonstrated a case that:
(a)There had been a miscarriage of justice on the basis of fraud, duress, suppression of evidence or the giving of false evidence or any other circumstance giving rise to a miscarriage of justice; and, or
(b)A party had defaulted in carrying out an obligation imposed on them from the orders and, in the circumstances arising as a result of that default, it is just and equitable to vary or set aside the order and make another in substitution; and
(c)If the answer to either of the above inquiries was yes, whether the court should exercise its discretion to set aside and, or vary the orders; and
(d)If the answer to each of those inquiries was no, whether orders should be made for the payment of capital gains tax liability from the funds held in the trust account of C Lawyers.
The summary dismissal judgment dealt with those issues as raised by the husband and did not approach determination of the application on the basis that it was an argument about $3,000 or about $65,000.
To the extent that the husband seeks referral of the wife’s counsel for disciplinary action for misleading the court, there is no basis for me to take such action. I have closely reviewed the transcript of proceedings and I am satisfied that the wife’s counsel did not mischaracterise the case and that he did not mislead the court.
To the extent, then, that the husband queries the proportionality of the wife’s costs, the case she was required to meet was an application that the orders of 4 September 2017 be set aside, in circumstances where it had been contended that she had engaged in fraudulent or other unlawful behaviour and, or, had breached court orders.
The costs agreement entered into between the wife and Mills Oakley in 2017 estimated the costs of enforcement proceedings in relation to which they had been earlier retained as $10,000 plus counsel’s fees of $4,000. If an updated estimate of costs was provided to the wife in June 2018 after the husband commenced the section 79A application, it was not before me.
The costs agreement entered into between the wife and Barkus Doolan estimated fees of $77,500 to final hearing (including counsel’s fees) in relation to the husband’s section 79A application.
The costs the wife now seeks fall below the estimate provided by Barkus Doolan.
Judicial bias
In his written submissions, the husband included a subheading “Judicial Bias”. Whilst I understood that to relate to an application he made in the parenting proceedings on 28 June 2021 that I recuse myself, and not to the costs application, for abundant caution, I observe that the husband’s recusal application was heard and determined on 28 June 2021 and was refused.
Discussion
In these proceedings, the husband was wholly unsuccessful. He made allegations of fraud, of giving of false evidence, of suppression of evidence and duress against the wife and those who have represented her. He also contended that the wife had been in breach of multiple orders going back over a period of some years. These are all serious allegations to make.
The wife was put to the task of defending those allegations in circumstances where it was determined that – even when taken at its highest – the husband’s evidence did not demonstrate that there were reasonable prospects of satisfying the court about those matters.
I am satisfied that written offers of settlement were exchanged between the parties in advance of the hearing date. I am further satisfied that in March 2019, the husband’s offer to settle the parenting proceedings was contingent upon her assuming the entirety of the capital gains tax liability herself. To the extent that the wife responded to that offer, inviting the husband’s view about the inclusion of orders to facilitate overseas travel in the parenting proceedings, the onus, in my view, fell to the husband to make a response to it, before any movement could be made on his proposal as to the section 79A application. It was not submitted – and there is no evidence – that the husband responded to the wife’s proposal for orders to facilitate travel at or around that time.
I am satisfied that the husband made a further offer of settlement in August 2019. In that offer, he accepted the wife’s parenting proposal. To the extent that he characterised his offer to resolve the section 79A proceedings as one that would have allowed the wife to settle the matter for $17,000, the submission fails to recognise that the capital gains tax estimate provided by Mr G was for $34,271 and the wife already had an order in her favour that the whole amount of capital gains tax liability be paid from the net proceeds of sale; that subsequent advice she had received caused her to consider that the liability may, in fact, be greater than that; that the wife contended at that time that the husband’s section 79A application was without prospect of success; and that, by that time, the wife had already incurred considerable legal costs resisting his application.
To the extent that the husband contends that the wife made no response to his letters in September and October 2020, having regard to the history of the settlement negotiations, I do not consider that any response would have satisfied the husband by that point, such that any further progress toward settlement could be made.
Ultimately, the wife’s assessment of the prospects of the husband succeeding on the section 79A application was made good and the findings and outcome of the summary dismissal application were not disturbed in the appeal proceedings.
On all accounts, the husband has been wholly unsuccessful in these proceedings and the wife has secured a result that was as good as her written offer made on 3 September 2019. At all relevant times, the wife notified the husband of her intention to seek an order for indemnity costs should the husband pursue his application unsuccessfully.
I am satisfied that the wife has greater financial security than does the husband. She owns real property and although it is subject to a mortgage, the mortgage is a modest one regardless as to whether the value of the property is $600,000 as she contends, or $850,000 as the husband contends. The wife is earning income and has a good salary available to her. Her living expenses, too, are modest and they are reasonable having regard to the fact that she has had care of the parties’ three children.
Although the wife is in a stronger financial position than the husband, she has had to meet the costs of raising the children since separation, with little financial support from the husband. It was not controversial that the husband’s child support was between $43 to $50 each month.
It is difficult to feel confident in the information contained in the husband’s Financial Statement. The husband contends that he earns no income. His regular expenses (including his day to day living costs) as set out in his Financial Statement are modest. His partner’s income is, however, insufficient to meet his personal expenditure, let alone any expenditure on herself or on their child, and it is difficult to see how, in the absence of anything more, his own personal expenses are met. He disclosed no credit card liabilities and made no submission about his partner financially providing for his family, although I have assumed she does to the extent of $600 per week.
It is difficult to see, having regard to the matters set out in his Financial Statement, why the husband is not, or might not be, eligible for social security support, although I can do no more than speculate about that matter.
Notwithstanding these matters, however, where the husband has been assessed to pay child support of $10 each week, I have assumed that the Child Support Agency has undertaken an assessment of his income when determining that amount and that that agency has concluded that the husband is a low income earner.
In circumstances where the husband contends he is impecunious, he submitted that a comparison of the parties’ respective financial circumstances would be sufficient to restrain the court from making any order for costs against him, let alone an order for indemnity costs. It is, however, well established that neither impecuniosity nor incapacity to meet a costs order can, per se, be determinative: Cooper & Oakley (No. 2) [2012] FamCAFC 187 (May, Thackray & Murphy JJ, at [14]). Impecuniosity is but one of the matters that the court must take into account when determining an application for costs and, to the extent that the husband contends that he does not have the capacity to meet any costs order, the balance of the proceeds of sale of the Property A property in the trust account of C Lawyers provide an obvious source from which an order for costs might be satisfied – in whole or in part.
Are there circumstances that justify the making of a costs order?
I am satisfied that there are circumstances that justify the making of a costs order in favour of the wife, namely:
(a)The outcome of the proceedings was – in effect – on the same terms as the wife’s settlement proposal made on 3 September 2019.
(b)The wife had put the husband on notice of her intention to pursue costs in the event he pursued the application unsuccessfully. The history of the litigation between the parties has been extensive and costs orders have previously been made in favour of the wife. The husband must have been alive to the possibility that a costs order may be made against him.
(c)The husband made and pursued allegations that the wife engaged in fraud, suppression of evidence, the giving of false evidence and breaches of court orders. Those serious allegations were not made out at hearing, nor in the appeal proceedings.
(d)Although the husband contended that the proceedings were necessitated by the wife’s breach of court orders, there were a number of opportunities he could have, but did not, take to ventilate those concerns well in advance of commencing the section 79A application.
(e)The wife’s financial circumstances are such that whilst she is in a stronger financial position than the husband, her income has had to extend to meet the costs of the children with little financial support from the husband.
What order, then, should be made as to costs?
Having concluded that there are circumstances that justify the making of a costs order, the question, then, is whether there should be a very great departure from the normal standard so as to award indemnity costs.
The wife submitted that she has incurred legal fees totalling $59,228.13 (inclusive of GST) and sought an order in her favour for payment of that full amount.
At the time the wife’s lawyers undertook work on the section 79A application, the applicable scale of fees was set out at Schedule One of the Federal Circuit Court Rules 2001. Noting that the matter had been listed for a two day hearing, under that schedule, the applicable costs were as follows:
(a)Item one: Initiating or opposing an application up to the completion of the first court date, $2,241, plus the daily hearing fee at item 13 applicable to that hearing being, here $305 (for a short mention).
(b)Item six: preparation for final hearing – two day matter: $5,921.
(c)Item 13: daily hearing fee for one full day hearing: $2,241.
(d)Item eight: final hearing costs for attendance of solicitor to take judgment and explain orders: $305, plus the daily hearing fee at item 13 applicable to that attendance, being, here, $305 (for a short mention).
(e)Item 14: disbursements for counsel’s fees, reasonably incurred, of $14,960.
(f)Item 14: disbursement for filing fees of $345.
To the extent that the wife incurred disbursements in relation to photocopying, document production, searches, travel and the like, in the vicinity of $2,350, I have been unable to quantify, with precision from the evidence available, the amount that would be allowed under the relevant rules, however, given that the parties’ trial affidavits and annexures totalled 384 pages), and that counsel would have been briefed with documents beyond those affidavits, it appears reasonable to conclude that disbursements would be allowed in the order of $500.
I further observe that, other than the fees relating to attendance to take judgment, I have not included any allowance for mentions where the parenting matter was also listed and the parties were required to have been at court in any event.
If an order for costs is made at scale, then the wife would be entitled to costs of no less than $26,623, but not likely to exceed $27,123. The wife’s legal fees that were actually incurred, are slightly more than double the applicable scale fees.
The costs agreements between the wife and each of her solicitors inform that the fees were charged to her at a rate that was a little more than double the scale fees. They fall within the range of fees often seen in costs applications before this court where parties are represented by CBD law firms. Where the contentions made in the proceedings were serious and related to conduct alleged to have occurred over a two year period, in multiple court proceedings before the section 79A application was filed and where the litigation history between these parties has been complex, I do not consider it was unreasonable for the wife to obtain legal representation and to engage counsel for the hearing.
The husband, having pursued serious allegations about the wife’s conduct, was wholly unsuccessful. This lends weight to the wife’s application for indemnity costs.
To the extent, however, that he alleged that the wife had engaged in fraud, suppression of evidence and giving of false evidence, I formed the view that his belief about those allegations was genuinely, but erroneously, held, rather than the husband having made those contentions, knowing them to be false.
Insofar as he commenced or continued proceedings which, if properly advised, he should have known had no reasonable prospect of succeeding, he was legally represented until September 2019. His former lawyer prepared the Initiating Application and affidavit in support, and conducted negotiations on his behalf. The affidavit in support filed on 19 June 2018 did not raise the same contentions in relation to fraudulent conduct as were raised in his affidavit filed 29 September 2019 after his former lawyer had ceased to act. I can only conclude, therefore, that the husband had acted on advice in the conduct of his case prior to his solicitor ceasing to act for him.
Any order for costs, including an order for indemnity costs, must be just. Here, no matter the order that is made – whether it be costs at scale or costs on an indemnity basis – injustice will be visited upon one party. The question, then, becomes one of which order represents the greater injustice.
In her trial affidavit, the wife deposed that as at the hearing date, there were funds of $65,128.08 held on trust by C Lawyers for the parties. Of that amount and by order of 29 January 2020, the sum of $37,466.16 was to be applied to the payment of the capital gains tax liability; and, by order in the appeal proceedings of 25 August 2020, the sum of $5,672 was to be paid to the wife by way of costs. The balance of the funds held on trust for the parties should, therefore, be $21,811.92.
If an order is made that the husband pay the wife’s costs on an indemnity basis, then he will lose the benefit of the funds currently held in the trust account of Catalyst Lawyers to the payment of the wife’s costs. These funds have been a thorn in the side of each party for many years now and have vexed the husband, in particular, greatly. In addition to the loss of those funds, he will be required to pay additional costs of in the vicinity of $39,000. Such an outcome will have a significant financial impact upon him and his family.
The wife did not contend, and the evidence does not reveal, that the husband has any assets of value that might be called upon to satisfy a costs order made in favour of the wife. Insofar as the husband has superannuation, where he is 54 years of age, I do not feel confident that he would be able to access his superannuation prior to reaching retirement age so as to satisfy any order I might make for costs on an indemnity basis or at scale. An order that payment occur in instalments only appears likely to prolong the financial relationships between the parties for many years to come.
The husband is qualified as a professional, but does not appear to have worked for some years now. Even if I considered that he would earnestly seek work, I cannot feel confident that he would be in a position to quickly re-build his business or secure a paid position such that an order for indemnity costs would be satisfied any time soon.
If an order for indemnity costs is not made, then the wife will be required to absorb costs not covered by the amount allowed at scale. This would see her paying costs in the vicinity of $32,000. She submitted that she remains indebted to her former lawyers and that she otherwise has credit card debt and loans owing to family members to meet counsel’s fees in relation to the section 79A application. I have inferred from the wife’s submissions that she has already made payment of approximately $40,000 toward her legal fees, and that she has $20,000 owing to her former lawyers and on her credit card and to family members.
If an order for indemnity costs is not made and the wife receives costs at scale, it will have a significant impact on her financially and this in turn may impact on the parties’ children. The funds that would have been available to her, but for these legal proceedings, will be gone. Given, however, that she is in a significantly stronger financial position than the husband, I consider she is likely to more readily recover from that impact than the husband will, if he is required to meet those costs.
On balance, I consider that if an order for indemnity costs is made against the husband, it will visit a greater injustice on him than the injustice that will be visited on the wife should an order be made for costs at scale.
Having regard to these matters, then, I am not satisfied that an order for indemnity costs should be made against the husband. Rather, I consider that an order should be made for costs in favour of the wife at a fixed sum of $27,123, so as to avoid the need for further litigation in relation to the assessment of those costs. In order to ensure that the wife receives at least most of those costs, I consider that the balance of the monies held on trust in the trust account of C Lawyers should be paid to the wife, leaving it up to her determine whether she takes steps to recover any outstanding balance from the husband.
In the event that the funds held on trust exceed the sum of $27,123, then by operation of the various orders in place between the parties, any balance remaining after the costs order has been satisfied should be paid to the husband.
The husband’s applications for costs
In his written costs submissions, the husband sought to make application for costs in relation to the following applications, earlier determined as between the parties:
(a)The wife’s Initiating Application filed 23 September 2016 seeking to set aside or vary consent property orders (file number NCC2588/2016); and
(b)His Application in a Case filed 22 August 2017 in those proceedings seeking urgent determination of his application for access to the parties’ investment property at Property A.
The husband submitted that he had not had the opportunity to seek costs in relation to those applications given the flurry of litigation over the years.
Review of the court file informs that on 20 February 2017, the wife filed a Notice of Discontinuance of the Initiating Application filed 23 September 2016. To the extent that proceedings continued thereafter, they continued in relation to an Application in a Case filed by the wife on 22 February 2017 for enforcement orders, resolved by consent on 23 February 2017; and also in relation to the husband’s application in a case for access to the property at Property A filed 22 August 2017, resolved by orders made on 4 September 2017.
As at the date on which the wife filed the Notice of Discontinuance; and as at the date on which the husband’s Application in a Case was determined, the applicable rules of court provided that an application for costs may be made:
(a)At any stage in a proceeding; or
(b)Within 28 days after a final decree or order is made; or
(c)Within any further time allowed by the court.[7]
[7] Rule 21.02, Federal Circuit Court Rules 2001
The husband’s applications for costs made in his submissions on 25 June 2021, some four years after the relevant applications were withdrawn or concluded, are clearly out of time and the husband made no application for leave to bring those applications out of time. To the extent that the husband’s submissions might be construed as an application for an extension of time to bring a costs application, I am not satisfied that the flurry of litigation precluded the husband who was legally represented at all material times, from making his application for costs at the requisite time and so time should not be extended.
I certify that the preceding one hundred and sixty (160) numbered paragraphs are a true copy of the Reasons for Judgment of Judge M Neville. Associate:
Dated: 14 December 2022
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