Kipling and Netis (No 2)
[2020] FamCAFC 306
•2 December 2020
FAMILY COURT OF AUSTRALIA
| KIPLING & NETIS (NO. 2) | [2020] FamCAFC 306 |
| FAMILY LAW – APPEAL – SECURITY FOR COSTS – Where there are serious doubts about the merits of the appeal and it is more likely than not that it will not succeed – Where it is apparent that the appellant has the ability to obtain funds when he needs them and his financial circumstances are not as dire, or as poor, or as impecunious as he has suggested to this Court – Where there is a proper basis for an order for security for costs to be made and it is not apparent that the litigation will be stifled if that order is made – Costs ordered in the sum of $10,000 to be paid within six months of the date of this order – Appeal stayed pending payment of the said amount. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules (2004) (Cth) r 19.05(2) |
| Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 Kipling & Netis [2020] FamCAFC 269 Sawer & Sawer [2007] FamCA 140 |
| APPLICANT: | Mr Kipling |
| RESPONDENT: | Ms Netis |
| FILE NUMBER: | TVC | 809 | of | 2015 |
| APPEAL NUMBER: | NOA | 56 | of | 2020 |
| DATE DELIVERED: | 2 December 2020 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide via telephone link |
| JUDGMENT OF: | Strickland J |
| HEARING DATE: | 2 December 2020 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 20 July 2020 |
| LOWER COURT MNC: | [2020] FCCA 2852 |
REPRESENTATION
| THE APPLICANT: | In Person |
| COUNSEL FOR THE RESPONDENT: | Mr Lake |
| SOLICITORS FOR THE RESPONDENT: | Roberts Nehmer McKee Lawyers |
Orders made on 2 December 2020 *as amended on 16 December 2020 pursuant to r 17.02 of the Family Law Rules 2004 (Cth)
Within six months of the date hereof the father pay *to the solicitors for the mother the amount of $10,000 by way of security for the costs of the mother in relation to appeal no. NOA 56 of 2020, *with such amount being held by the solicitors pending the outcome of the appeal.
Pending payment of the said amount appeal no. NOA 56 of 2020 be stayed.
The costs of and incidental to this matter be reserved pending the outcome of appeal no. NOA 56 of 2020.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kipling & Netis (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: NOA 56 of 2020
File Number: TVC 809 of 2015
| Mr Kipling |
Applicant
And
| Ms Netis |
Respondent
EX TEMPORE REASONS FOR JUDGMENT
Introduction
Before the Court today is the Response to an Application in an Appeal filed by Ms Netis (“the mother”) on 6 October 2020, and specifically, the order sought in that Response is that Mr Kipling (“the father”) pay into the court the sum of $20,000 as security for costs within 24 hours.
That Response was filed in response to an Application in an Appeal filed by the father on 1 September 2020, seeking an order extending the time to file a Notice of Appeal against orders made by a Judge of the Federal Circuit Court of Australia on 20 July 2020. The Response primarily sought the dismissal of that application, but in the event that an extension of time was granted, then the mother sought the order for security for costs. The father’s application was not dismissed, but granted, and he has now filed his Notice of Appeal.
Today, the order sought has been further clarified, in that there is now before the court, and I will explain why that is in a moment, an affidavit of the mother to which is annexed a costs notification, so-called, from her solicitors, setting out the potential costs of the appeal in respect of which an order for security for costs is now sought. In that notification it is expressed that the total costs would be between $15,000 in round terms, and $21,400 in round terms. However, those amounts include the costs in relation to this application itself.
Thus, on the basis of looking at and considering what the potential costs of the appeal would be, the range as put on behalf of the mother is approximately $10,000 to $14,000, and that is the range I propose to consider in respect of this application, and as referred to already, the order sought is that the amount fixed for security for costs be paid within 24 hours.
However, I have indicated to the mother’s counsel that if I am prepared to make such an order, I would not make an order that costs are to be paid within 24 hours, and I will explain that later in these reasons. Further, it would not be paid into court but would be paid to the mother’s solicitors to be held by them pending the outcome of the appeal.
The application is opposed by the father.
Background
The orders made by the primary judge on 20 July 2020, and in respect of which an appeal has now been brought, provided for the father to pay to the mother the costs of and incidental to a contravention application filed on 16 August 2019 by the father, on an indemnity basis, in the sum of $10,680.24, with payment of that amount being made within two months of the date of the orders. That order followed on from the primary judge dismissing that contravention application.
The Relevant Principles
The principles governing an application for security for costs of an appeal were summarised in Sawer & Sawer [2007] FamCA 140 wherein the Full Court said as follows:
19.The power in this Court to make an order for security for costs is to be found in s 117(2) of the Act, which is in the following terms:
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.
20.The provisions of s 117(2A) are as follows (- s 117(4) and (5) are not presently relevant):
In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)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;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
21.The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:
a) the prospect of success of the litigation;
b) whether the claim for security is made bona fide;
c) whether or not an order for security would stifle the litigation;
d)whether or not the litigation may involve a matter of public importance;
e)whether or not there has been a delay in bringing the application for security;
f)whether there would be difficulty in enforcing an order for costs
(Luadaka v Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)
Those latter matters referred to by the Full Court in Sawer also largely mirror r 19.05(2) of the Family Law Rules 2004 (Cth) (“the Rules”).
Turning then to the matters I consider relevant in order to determine this application.
The prospects of success of the appeal
This matter was addressed in my reasons for judgment delivered on 28 October 2020 (see Kipling & Netis [2020] FamCAFC 269), given of course, that in considering an application for an extension of time to file a Notice of Appeal, the merits of the appeal are highly relevant. What I found in those reasons, and particularly at [19] to [24], was that on the material before the court at that time, I was unable to find that there was absolutely no chance of success of the appeal. That of course is the test in considering grounds of appeal in the context of an application for an extension of time. However, that is not the test in considering the prospects of success of the appeal in the context of an application for security for costs. In other words, it is not as stark as that, and what I mean by that is, it is not necessary to find that there is absolutely no chance of success of the appeal.
What I also found in those earlier reasons, and in particular at [23], was that I had serious doubts as to the merits of the two grounds of appeal asserted in the Draft Notice of Appeal at that stage.
There are two grounds of appeal raised by the father in the Notice of Appeal, as follows:
(1)The Honourable Trial Judge made an error of law in failing to take proper account of the factors in s 117 of the Family Law Act 1975.
(2)The Honourable Trial Judge made an error of law in failing to correctly apply the settled law in such cases as Colgate Palmolive and Anor v Cussons Propriety Limited.
(as per original)
When I heard the application for an extension of time, those grounds were not particularised, and I had no further documentation, or information, or detail before the Court to properly address them. However, I have an affidavit filed by the father on 30 November 2020, which was an affidavit filed specifically in relation to the application seeking the order for security for costs, and in that affidavit at paragraphs 27 to 47, the father sets out in effect his arguments in support of those two grounds of appeal.
I do not propose to set out those paragraphs in these reasons for judgment, but I will deal with them in a summary fashion.
In relation to the first ground of appeal, which in effect challenges the primary judge’s consideration of the factors in s 117 of the Family Law Act 1975 (Cth) (“the Act”), what the father argues is that his Honour simply mentioned each s 117 factor as providing a checklist, rather than giving proper and sufficient consideration to them in determining the application for costs that was before his Honour. In my view, that assertion has no merit.
His Honour plainly not only identified, but addressed each of the relevant factors in s 117, and specifically in s 117(2A), and he did that from [21] to [35] of his reasons for judgment. Thus, in no sense can those reasons be described as a mere checklist, but in a very real sense, his Honour engaged with each of the relevant factors, and that consideration led to his Honour’s decision in terms of there being a circumstance, or circumstances, justifying an order for costs.
Turning then to the second ground of appeal where, in summary, the father asserts that his Honour failed to correctly apply the settled law in relation to the awarding of indemnity costs.
The consideration of that issue centres on the well-known decision of Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225, and specifically the judgment of Sheppard J. His Honour in that case identified examples of what he considered would provide the necessary exceptional circumstances to justify departing from the normal rule of costs being awarded on a party/party basis, and awarding costs on an indemnity basis. The primary judge here addressed that in his reasons for judgment at [40] to [42], where his Honour identified two examples given by Sheppard J, which his Honour felt applied in this case. The first example was, and I quote, “[w]here 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. …”. And the second example extracted from Colgate-Palmolive was, where there is “an imprudent refusal of an offer to compromise”.
The father in his affidavit specifically asserts that his Honour erred in his application of that first example, and what he says, in summary, is that albeit he attempted to obtain the advice, he had had no advice in relation to the correspondence he received from the wife’s counsel, in which counsel set out the submissions that were to be made to his Honour in support of the claim that was before his Honour at that time, and which submissions raised the issue of Anshun estoppel. The father argues that as a result, he could not be said to have been “properly advised” in accordance with the example referred to above from Colgate-Palmolive.
Unfortunately, with respect to the father, who appears without legal representation, that is simply incorrect, and it is not a basis for that example not to apply, and his Honour, in applying it, made no error, let alone any appealable error which could be successful on appeal.
The point is not whether or not he obtained advice. The point is that at the time of the father pursuing his contravention application, if properly advised, he should have known that there was no chance of success, but he still proceeded, and that creates the relevant exceptional circumstance. That was the case here and indemnity costs were warranted.
I also note that there has been no appeal against the order made by the primary judge on 10 March 2020, when his Honour dismissed that contravention application, for the reason that Anshun estoppel applied.
In terms of the other example which his Honour took from Colgate-Palmolive, namely, where there is an imprudent refusal of an offer to compromise, his Honour also found that that applied here, in that there was an offer to compromise, which was refused, and his Honour found that to be imprudent.
I note though that the father has limited his submissions and the contents of his affidavit in support of this particular ground of appeal, to the first example, and that is as far as I need to go. Of course, with the further example, that just adds additional support to his Honour’s finding of exceptional circumstances, and further justifies his Honour making an order for indemnity costs.
In summary, although I still cannot be definitive as to whether the appeal is entirely devoid of merit, having now had the opportunity to further consider the matter, and understand the contentions of the father, and bearing in mind that even without that, in my previous reasons for judgment I indicated that I had serious doubts about the merits of the appeal, I can now say that I have far more serious doubts about it. Adopting the phrase put by the mother’s counsel today, namely, that it is more likely than not that the appeal will not succeed, that is clearly the position here.
The financial circumstances of the parties
Although s 117(2A)(a) provides that it is necessary to consider the financial circumstances of both parties, here, in reality, it is the financial circumstances of the father which need to be the subject of consideration, and I say that because, and I will elaborate on this in a moment, the primary reason for an application for an order for security for costs, is that if the appeal proceeds, and if it is dismissed, and if a costs order is made, then if there is doubt about the ability of the respondent in the appeal to enforce that order for costs, then security for costs is intended to overcome that doubt.
In relation to the financial circumstances of the father, he filed a Financial Statement on 30 November 2020, wherein he deposes to his income being the JobKeeper payment through Centrelink, and a small family benefit totalling $659 per week. He has some assistance in meeting his expenses from his partner, but in terms of his expenses, he claims total personal expenditure of $976 per week.
As far as assets are concerned, the father deposes to owning a house property, which he says, has a value of $320,000. He has a motor vehicle worth approximately $15,000, and he has some household contents worth approximately $5,000. In terms of liabilities, his major liability is a mortgage secured over the home that he owns, which currently has a debit balance of $371,764. He has some other loans as well, including credit card debts, and importantly, they total approximately $80,000. He also has an overdraft, and says his total liabilities are $521,663.
Thus, prima facie, his financial circumstances can only be described as poor and, to not put too fine a point on it, what the father says in opposition to the application for an order for security for costs, is that he is simply unable to afford to meet any such order.
I will come back to the father’s financial circumstances in a moment, but I will move to the next factor to be considered, which has some synergy with the financial circumstances of the father, and that is whether an order for security would stifle the litigation.
Would an order for security for costs stifle the litigation
In simple terms, what that means is, if the father is unable to pay an order for security for costs, and there is a consequential order made that the appeal be stayed pending payment of that order, then the father argues that that would stifle the litigation. In other words, he would not be able to pursue his appeal.
Pausing there, I mention that in clarifying the precise order sought by the mother today, her counsel did indicate that the consequential order sought is just that, namely, that the appeal be stayed pending payment of any order for security that might be made.
Thus, as can be seen, the father’s financial circumstances have relevance, not only per se in terms of whether he can meet an order for security for costs, but also in relation to whether such an order would stifle the litigation.
There are other factors that are sometimes taken into account, but it seems to me that those three factors are the primary ones which need to be considered here, and they are the factors in respect of which I have heard argument primarily from the mother’s counsel.
In terms of the father, he has rested on his affidavit, which I referred to earlier, and there is nothing else arising in that affidavit that I need to consider in terms of any further primary factor.
The difficulty in enforcing an order for costs
To repeat, that is the primary reason for applying for an order for security for costs, and it is highly relevant here because, of course, given that the father says that he has no ability to make a payment by way of security for costs, if the appeal proceeds, and is dismissed, and if an order for costs is then made, presumably the father’s financial position will not be any better at that point, and thus he would not have the ability to meet that order, and there would be no prospect of such an order being enforced.
That is the prima facie position as it is presented on the father’s evidence before the Court today, and as can be seen, each of those factors referred to above are interrelated. The balance that I have to arrive at is balancing the prospect of the litigation being stifled, against the difficulty of enforcing any order for costs.
In terms of resolving that issue and finding that balance, it is obviously highly relevant as to the prospects of success of the appeal, because, of course, if there are limited prospects of success, then it is more likely than not that the appeal will be dismissed, and more likely than not that there will be an order for costs made in favour of the respondent, and then the prospect of that not being able to be enforced looms large.
That sequence of reasoning supports an order being made for security for costs because, in considering the question of whether the litigation will be stifled if the appeal has only limited chance of success, then the force of that factor is lessened significantly.
I return to the father’s financial circumstances because there are some matters I need to have regard to.
First, despite the position presented in his financial statement, it is common ground that the father was able to fund solicitors and brief a barrister to appear on his behalf in relocation proceedings heard in early November 2020, and which proceedings are due to complete in December 2020. The amount that he was required to pay for those legal services was $23,000. The father tells me that he funded that by credit cards, but also by borrowing about $10,000 from his partner. He says that in terms of the credit cards, they are at their limit, but frankly, there is no proof of that, and even if it is the case, that circumstance alone establishes that the father has the wherewithal to obtain funds to meet commitments that he chooses to meet.
Separate to that, the father in his affidavit, and also referred to in his Financial Statement, indicated that he has a company called Y Proprietary Limited. He says he is the sole director of that company, and the shares are held in a family trust. There is a corporate trustee of that family trust but he is the sole director of that corporate trustee, and he is a beneficiary of the family trust. The father does not disclose in his Financial Statement any income from that company, of which he is clearly an employee. It is a company which he operates, but of course he is only able to obtain the JobKeeper payment he receives by being an employee of that company, and presumably the father has been able to satisfy the relevant Commonwealth Government department that his income from his employment is such that he would qualify for the JobKeeper payment.
What the father tells me about that company is that the business it operates is a distribution service, and for that purpose he leases premises for which he pays $377 a month, he has stock on hand of approximately $10,000, and he operates primarily online. Now, none of that is set out in his affidavit, nor in his Financial Statement, and so that adds weight to my finding that the father has the ability to obtain funds when he needs them. Thus, I am not prepared to find that the father’s financial circumstances are as dire, or as poor, or that he is as impecunious as he has suggested to this Court.
Given that, and given my finding in relation to the prospects of success of the appeal, in terms of the balance that I have to arrive at, I am satisfied that there is a proper basis for an order for security for costs to be made.
In terms though of the amount, I have mentioned the range of costs that the mother’s solicitor has suggested would be incurred in the appeal, and I am prepared to accept that the figure of $10,000 would be an appropriate amount to cover the costs of the appeal. Thus, if the appeal is dismissed, and if there is an order for costs made, as I anticipate there would be, an amount of $10,000 by way of those costs would be quite reasonable.
The next question though, is what consequential orders I make, namely, first, time to pay the amount, and then, what I do with the appeal.
In relation to the time to pay, what I know is that there was an order made by Kent J in proceedings earlier this year, where his Honour refused to reinstate an appeal brought by the father that had been deemed abandoned, and his Honour there also made an order for costs in favour of the mother in the amount of $6,336, and his Honour allowed the father six months to pay that amount.
Thus, subject to any submissions from either the father or mother in that regard, I propose to allow six months for payment of the amount that I am going to order for security for costs, and in the meantime, plainly the appeal will be stayed pending payment, and that stay will continue until and unless the amount is paid.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the ex tempore reasons for judgment of the Honourable Justice Strickland delivered on 2 December 2020.
Associate:
Date: 17 December 2020
0
4
2