Kordell and Van der Linden (No. 2)
[2008] FamCA 1042
•24 September 2008
FAMILY COURT OF AUSTRALIA
| KORDELL & VAN DER LINDEN (NO. 2) | [2008] FamCA 1042 |
| FAMILY LAW – PROPERTY SETTLEMENT – Wife deceased |
| APPLICANT: | Ms Kordell |
| RESPONDENT: | Mr Van der Linden |
| FILE NUMBER: | PAF | 3975 | of | 2003 |
| DATE DELIVERED: | 24 September 2008 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Justice STEVENSON |
| HEARING DATE: | 23 June 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton |
| SOLICITOR FOR THE APPLICANT: | Caldwell Martin Cox |
| COUNSEL FOR THE RESPONDENT: | Mr Gould |
| SOLICITOR FOR THE RESPONDENT: | Moira Ryan Lawyers Pty Limited |
Orders
That the parties shall forthwith join in the sale and do all such acts and things and shall execute all deeds, documents and instruments as may be necessary to list for sale and sell the property situate at and known as Y property in the State of New South Wales (being the whole of the land comprised in Certificate of Title Folio Identifier … (‘the property’) including preparing the said home for sale, which cost shall be borne equally by the parties, for a price and with an agent to be agreed upon between the parties or, in default of such agreement as to the selling price or agent for more than 14 days, at a price and with an agent appointed by the President for the time being of the Australian Property Institute Inc. (NSW Division) whose decision shall be final and binding upon both parties.
In the event that the property has not sold within three (3) months of being listed for sale by private treaty in accordance with order (1) above, the parties shall do all such acts and things and sign all such deeds, documents and instruments as may be necessary to cause the said property to be sold by the same agent by way of public auction on the following terms:
(a)that such auction take place within two (2) months from the date of placing the property for sale by public auction or as soon as practicable thereafter;
(b)that the reserve price for such auction be as agreed between the parties or failing agreement for more than seven days, as determined by the selling agent;
(c)that the parties pay all auction expenses as requested by the selling agent as and when they fall due;
(d)that the parties shall do all such acts and things as may be necessary or recommended by the selling agent to properly present the property for sale and to make same available for inspection by prospective purchasers;
(e)that either party be at liberty to bid for the purchase of the property at auction;
(f)that the parties shall attend the auction and if necessary negotiate with the highest bidder at auction if the reserve price is not reached.
Upon completion of the sale of the property in accordance with orders (1) and (2) above, the parties shall distribute the proceeds of sale, in the following order and priority:
(a)in payment of legal costs and real estate agent’s commission and expenses
(b)in payment of any fees due for the nomination of a valuer and fixing of a price as hereinbefore provided and in payment of valuation fees, if any
(c)in payment of 51% of the balance then remaining to the husband and in payment of the balance of 49% to the executor of the estate of the late wife.
That the executor of the estate of the late wife pay to the husband an amount of $3,000, from her share of the proceeds of sale of the property on account of his costs of the Application In A Case filed on 29 April 2008.
IT IS NOTED that publication of this judgment under the pseudonym Kordell & Van der Linden is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAF 3975 of 2003
| MS KORDELL |
Applicant
And
| MR VAN DER LINDEN |
Respondent
REASONS FOR JUDGMENT
the proceedings
These proceedings concern settlement of property. The applicant is Ms Kordell, the legal personal representative of the late Mrs Van der Linden (‘the executor’) and the respondent is the husband, Mr Van der Linden.
The proceedings commenced in November 2003 when the late Mrs Van der Linden (“the wife”) filed an application for parenting and property orders. A defended hearing took place in October 2004, with final orders being made on 13 October 2004. It was common ground that the wife was terminally ill at the time of the trial. The husband appealed successfully against these orders and on 4 August 2006, and the Full Court remitted the matter for rehearing.
The wife initially developed cancer in July 2001 and was treated with surgery, chemotherapy and radiotherapy. Unfortunately her illness recurred in August 2004 and progressed quickly. She died in February 2005.
By a will dated 17 December 2004 the late wife appointed her sister, Ms Kordell as executor of her will and trustee of her estate. Ms Kordell was substituted for the late wife as a party to these proceedings by order of the Full Court made on 8 June 2005, at the commencement of the hearing of the husband’s appeal. The rehearing came before me on 23 June 2008.
On 9 August 2006 the husband commenced proceedings in the Supreme Court of New South Wales pursuant to the Family Provision Act 1982 (NSW), on behalf of the two children of the marriage, C born in March 1992 and J born in July 1993. The Supreme Court litigation awaits the finalisation of these proceedings.
The will of the late wife bequeathed her estate in equal shares to C and J and R, her daughter of a previous relationship. The will provided that each child take his or her share in the estate upon attaining the age of 25 years. There was provision for the trustee to apply any part of the income and capital of the estate for the maintenance, education or advancement in life of any of the three children prior to their attaining the age of 25 years.
On 29 April 2008 the executor filed an Application in a Case, seeking an order to compel the husband to transfer the Supreme Court proceedings to this court. Alternatively, she sought an order that these proceedings be transferred to the Supreme Court. I dismissed this application on 17 June 2008 and the costs thereof have been reserved to this hearing.
Background
The husband was born in December 1956 and is now 51 years old. The late wife was born in December 1953 and died, at the age of 52, in February 2005. The husband and wife married in January 1992 and separated under one roof on 26 August 2002. The wife moved into separate accommodation a short time before her death.
There was some disagreement between the husband and the wife as to when they began to live together. He said that they commenced cohabitation in June 1991. She maintained that they began to live together about one year before their marriage.
The wife’s daughter, R, was born in November 1982 and was about 8 years old at the commencement of cohabitation. She lived with the husband and the wife throughout their relationship.
In February 1990 the wife purchased a property at E in Victoria (‘the E property’) for $105,000. She obtained a mortgage loan of $100,000. The family lived in this property until 1993, when they moved to K in New South Wales.
The husband claimed that he had savings of approximately $65,000 at the commencement of cohabitation and that he used this money to reduce the mortgage on the E property. The wife agreed that he used his savings to reduce the mortgage but, to her recollection, the amount was $40,000 to $45,000.
The husband also claimed that, at the commencement of cohabitation, he cashed in a non-compulsory component of his superannuation and received $16,500. He said that he also sold a car for $4,500 and used some of these funds to pay credit card debts of the wife. There did not seem to be much dispute about these contentions.
The wife ceased employment in January 1992 and received a non-preserved portion of her superannuation, amounting to $17,000. She used this money to further reduce the mortgage on the E property.
The wife’s parents died in 1992 and she inherited from them:
· Toyota motor vehicle valued at $24,000, for which she paid $12,000 to her sister to acquire her half share
· $58,554 in cash
· $2,000 in cash from the sale of chattels
· household items valued at $10,000
· refrigerator valued at $2,000
The cash component of the wife’s inheritance was used to discharge the mortgage on the E property.
In April 1993 the wife sold the E property for $105,000. She and the husband then purchased vacant land at Y in New South Wales for $115,000. According to the husband they had approximately $30,000 in savings at this time.
The husband and the wife erected a house on their land at a cost of $138,000, plus $9,000 for a driveway and fencing. For this purpose they borrowed $100,000 from the Colonial State Bank. This mortgage was paid out in 2002.
The wife did not engage in paid work between January 1992 and May 1997. She then resumed employment and worked full time until 31 August 2004.
After the separation on 26 August 2002 the husband gave $14,246 to his sister. He maintained that these funds were set aside to pay the children’s school fees. During the first trial he conceded that this money should be added back as a notional asset.
In December 2003 the husband was diagnosed with Type 2 Diabetes. In 2007 he underwent surgery for renal cancer. There was expert evidence as to his medical condition, to which I will refer later in these reasons.
At the time of the first trial the husband had superannuation with a total value of approximately $179,000. The fund balance has now increased to $305,367.
Before her death the wife arranged for her daughter R to receive the whole of her superannuation entitlements. Late in 2005 R received a direct payment of $71,433.
The Evidence and Witnesses
The applicant, Ms Kordell, relied on the following written evidence:
· affidavit of the wife sworn 29 July 2004, paragraphs 1 to 24, 37, 57 to 90
· affidavit of the wife sworn 20 September 2004, paragraphs 6 to 10
· affidavit of Ms Kordell sworn 21 March 2008
The respondent, the husband, relied on the following written evidence:
· affidavit of the husband sworn 18 June 2008
· Financial Statement of the husband sworn 18 June 2008
Ms Kordell and the husband were cross-examined. They both impressed me as truthful witnesses. By consent, a transcript of the oral evidence of the late wife in the first trial was tendered in evidence.
Approach To These Proceedings
Section 79(8) provides that, where a party dies before proceedings for property settlement are completed, the proceedings may be continued by or against the legal personal representative of the deceased party. The court may make such order as it considers appropriate if it is of the opinion:
· that it would have made an order with respect to property if the deceased party had not died and
· that it is still appropriate to make an order with respect to property
It is sufficient that the court would have made some order as to property settlement. It is not necessary to identify the precise order which would have been made: see, for example, In the Marriage of North [1987] 11 FamLR 735. In this case, the late wife was the applicant, thus Ms Kordell continues the proceedings for the benefit of her estate.
Once persuaded that the requirements of subsection 79(8)(b)(i) and (ii) are satisfied, the court then adopts the following approach:
· firstly, the assets, liabilities and financial resources of the husband and the estate are determined
· secondly, the contributions, within the meaning of paragraphs (a) to (c) of section 79(4), are identified and weighed against each other
· thirdly, the matters in paragraphs (d) to (g) of section 79(4) must be considered
· finally, an order under section 79 must not be made unless the court is satisfied that, in all of the circumstances, it is just and equitable to do so.
Obviously, section 79(4)(g) has no relevance in these proceedings as the children have only one surviving parent. Similarly, a number of the factors set out in section 75(2) have no relevance when one party to a marriage is deceased.
I am satisfied that an order for property settlement would have been made if the wife had not died. I take this view primarily because the children are under the age of 18 and there was a substantial imbalance in the value of the superannuation entitlements of the husband and the wife. It is not necessary that I identify precisely what order would have been made.
I am also satisfied that it is still appropriate to make an order with respect to property. The husband now has sole responsibility to care for the children. As well, it seems to me that the late wife’s superannuation requires consideration, whether as an added-back asset or a section 75(2) factor.
The Assets, Liabilities and Financial Resources
The Assets
There was agreement as to the nature and value of the following assets:
Non-Superannuation Assets
1.
Y property
$610,000
2.
Furniture (H)
$4,500
3.
Savings (H)
$60,541
Superannuation Assets
4.
T Benefit (H)
$305,367
There was a dispute as to whether the superannuation paid to R in 2005 and legal fees paid by the husband and the estate should be added back to the list of assets.
In the first trial the wife said that she intended to collect her superannuation on the basis that she would have to retire from the workforce due to ill health. She said nothing about the use which she proposed to make of this money.
Ms Kordell said that she discovered that R was solely entitled to the wife’s superannuation when she advised the two funds of her sister’s death. She said that she was not surprised that the wife had taken this step, as she was aware that her sister wished to help R financially at that time.
On behalf of the husband it was contended that the sum of $71,433 should be added back to the list of assets. One suggested reason was that the late wife gave evidence in the first trial that she intended to bring about an equal distribution of her estate to all three of her children.
On behalf of Ms Kordell it was submitted that the late wife’s superannuation should not be added back, because this money never formed part of her estate. It was said that she understood her options in relation to her superannuation and elected that her daughter R should receive this money.
It is correct that the wife’s superannuation never formed part of her estate. It is also the case that the benefit did not vest in her, prior to her death. It seemed to be agreed in the first trial that she could have accessed her superannuation prior to her death, as there was no doubt that she was terminally ill. The transcript of her evidence indicates that she considered withdrawing the money in her two superannuation funds but, obviously, she later changed her mind.
I am not persuaded that the late wife’s superannuation should be added back to the list of assets. Clearly, she was aware of her options and chose to assist her daughter R. C and J, to the knowledge of their terminally ill mother, would have the ongoing financial support of their father. The fact is that the superannuation never vested in the wife and never formed part of her estate. I will, however, take into account the fact of this payment to R pursuant to section 75(2).
On behalf of the husband it was contended that neither party’s paid legal fees should be added back to the list of assets. It was pointed out that he gave unchallenged evidence that he has paid his legal costs from income earned after separation. It was submitted that the estate’s legal fees should not be written back, as the only evidence as to their quantum was a handwritten estimate which lacked particularity. (exhibit 4)
Nothing was put on behalf of the estate to counter these submissions, which I find persuasive. I will not add back the paid legal fees of either party to the list of assets.
As noted, the husband conceded in the first trial that there should be an add-back of $14,246 on account of the money which he gave to his sister following the separation. I can see no reason why this money should be excluded from the list of assets now. This figure will be included as an asset which has been prematurely distributed to the husband.
I thus find the assets to be as follows:
Non-Superannuation Assets
1.
Y property
$610,000
2.
Furniture (H)
$4,500
3.
Savings (H)
$60,541
4.
Add-back of money paid to husband’s sister
$14,246
Superannuation Assets
5.
T Benefit (H)
$305,367
The Liabilities
The only suggested liability was described as “unpaid legal fees and other costs of the estate (exhibit 4), which appeared in the balance sheet submitted on behalf of the estate”. The figure of $102,676 was said to relate to the first trial, the appeal, the remitted hearing and all steps taken by the executor to realise the estate and obtain a grant of probate.
The only evidence as to the legal fees of the estate was the handwritten document to which I have already referred (exhibit 4). A real difficulty is that there was no breakdown of the amount of “e$55,000” said to be “further costs incurred by way of the appeal and the remitted rehearing and the administration of the estate, together with interest to the conclusion of the trial”. In my opinion this evidence is insufficient to warrant a finding that the estate has a debt for legal fees in the sum claimed. I will take into account pursuant to section 75(2)(o) however, that the estate obviously has unpaid legal fees in a sum yet to be quantified. I thus find that there are no liabilities.
Financial Resources
There was no suggestion that either party has a financial resource.
Contributions
At the commencement of cohabitation the husband had savings of either $40,000 to $45,000 or $65,000. He produced no documentary evidence to substantiate that his savings amounted to $65,000. He also received a total of about $21,000 from a superannuation benefit and the sale of his car. He thus had available liquid funds of some $61,000 to $66,000 or $76,000 at the commencement of cohabitation.
When the parties began to live together the wife owned the E property, which was heavily encumbered by a mortgage. The equity in the property appears to have been approximately $5,000. It is thus clear that the husband’s initial contributions substantially outweighed those of the wife.
Around one year after the parties began to live together, however, the wife received $17,000 as the non-preserved component of her superannuation when she left the paid workforce. Six months later she inherited from her parents property worth $84,554. Within one and a half years of the commencement of cohabitation, therefore, the wife had received cash in a total sum of $75,554 and other property to the value of $26,000. In my view, these early contributions of the wife match the initial contributions of the husband. I am here referring to the non-superannuation assets.
Both parties made substantial cash contributions to the reduction of the mortgage on the wife’s E property. In turn the sale proceeds of this asset, being some $105,000, were a significant component of the purchase price of the Y property.
After the birth of the two children the husband and the wife adopted traditional roles within the household. He was the major breadwinner and she devoted herself to the care of the children and the homemaking role. In the trial before me the husband said that he “looked after the outside of the house and [the wife] did the inside jobs basically”.
The husband worked full time in relatively well paid employment throughout the relationship. The wife engaged in paid work from the commencement of cohabitation until January 1992 and again from 1997 until the separation in August 2002. Each of the parties used their earnings for the benefit of the family.
The husband contributed to the financial support and parenting of the wife’s daughter R. I am not aware whether R’s father paid any child support.
Since the death of the wife the children have been fully supported and cared for by the husband. Between the separation in August 2002 and her death in February 2005 the wife contributed to their care and support.
The husband gave unchallenged evidence that his savings have been accrued since the separation. For practically all of the period between August 2002 and the death of the wife she was in paid employment and the family all lived in the former matrimonial home. In these circumstances I infer that the wife made an indirect contribution to the husband’s savings.
The husband currently has superannuation benefits with a value of $305,367. His unchallenged evidence was that he had superannuation of $14,000 in one fund prior to the relationship and that some component of his current fund also accrued prior to the commencement of cohabitation. At the time of the first trial the husband’s superannuation was valued at approximately $165,000. The value of his fund has thus increased by about $140,000 in the last four years.
The wife obviously had a superannuation benefit at the commencement of cohabitation but there was no evidence of its value. Some component of the money paid to R in 2005 must have accrued between the separation in August 2002 and August 2004, when the wife ceased employment. As noted, however, the family lived in one home during that period. The evidence does not enable me to quantify the pre-cohabitation and post separation elements of the wife’s superannuation.
Conclusion as to Contribution
It was submitted on behalf of the husband that I should adopt an asset-by-asset, rather than a global, approach to contribution. I have elected not to do so for a number of reasons. Firstly, the fact of separation under one roof means that the husband and the wife continued to make contributions to their property and the parenting of their children beyond August 2002. Secondly, the available evidence does not permit quantification of their contributions to their superannuation funds, outside the period of their cohabitation and separation under one roof. Thirdly, the husband said in his affidavit that there was a reconciliation of the relationship for “a few months” in 2003. In my view, these considerations make preferable a global approach to contribution.
In my assessment, the contributions of the husband and the wife were equal as at the date of separation and as at the date of the first trial. In making that finding I am mindful that they occupied the same home, with their children, for some two and a half years after they separated. For most of that period they both worked, cared for the children and maintained their property. Previously they adopted roles which complemented each other. I have already indicated that I am satisfied that the husband’s initial contributions were matched by the lump sum contributions of the wife during the first eighteen months of the relationship.
Obviously, the husband has made contributions since the death of the wife. He has accrued savings and been solely responsible for the care of the children. He has contributed to his superannuation fund, which has increased in value. He has been solely responsible for the maintenance of the Y property.
It is my view that the contributions of the husband since the death of the wife warrant a finding of 60% in his favour. These contributions, although significant, must not be permitted to eclipse the substantial contributions made by the wife during her life. I thus find that contribution should be assessed at 60% to the husband and 40% to the estate of the wife. This finding applies to both the superannuation and non-superannuation assets. The superannuation entitlements of both the husband and the late wife accrued, to a large extent, during their cohabitation.
Section 75(2) Factors
I will refer only to those factors set out in section 75(2) which appear to me to have relevance to the present proceedings.
section 75(2)(a): the age and state of health of each of the parties;
The husband is 51 years old and has health problems. He suffers from Type 2 diabetes and has undergone surgery for the removal of a kidney and an adrenal gland.
section 75(2)(b): the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The husband is employed on a full time basis and earns a gross salary of $2,678 per week. His evidence was that his health problems have recently caused him to change his work role, although not so as to reduce his income.
There was evidence from the husband’s general practitioner, Dr B and his urologist, Dr R, who provided reports. Dr B gave oral evidence by telephone.
Dr R performed the husband’s surgery in 2007. His opinion was that the chance of development of a metastatic disease was less than 5%, as was the prospect of future renal failure. It was Dr R’s opinion that “historically, in people who have lost one kidney but who have no pre-existing kidney disease, life expectancy, working life and possibility of renal failure in the future, is comparable to the normal population”.
Dr B was of the view: “in summary [the husband] has several medical problems which place him at markedly increased risk of complications and consequent disability which could significantly impact on his ability to continue to carry out normal working duties as required. The prognosis of these conditions is for a gradual deterioration and greater impact on his earning capacity in the long term.”
In my view, it is significant that Dr B used the words “gradual” and “in the long term”. He did not predict an impact on the husband’s capacity to engage in gainful employment other than at some unspecified time into the future.
The differential between the husband’s income and expenses is such that he has been able to accumulate savings of about $56,000 since the separation. In addition, he has been able to pay total legal costs of around $80,000 solely from his income. It is thus reasonable to conclude that he is in a comfortable financial position.
The estate is liable for legal costs which appear to be substantial, on the available evidence. These costs will be ongoing, as the Supreme Court litigation has yet to be finalised.
section 75(2)(c): whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The husband has sole responsibility to care for C, now 16, and J, now 15. Given the ages of the children, this responsibility is of relatively short duration.
The husband’s unchallenged evidence was that he received some assistance with the care of the children from their half sister R in June/July 2006, when she stayed in the former matrimonial home.
R now lives in W and has recently given birth to her first child. It thus seems unlikely that she would provide assistance with the care of her half siblings in the future.
section 75(2)(e): the responsibilities of either party to support any other person;
Both the husband and Ms Kordell have responsibility to support C and J. The will of the late wife gave a power of advancement to Ms Kordell, in her sole discretion, to make provision for the maintenance, education and advancement in life of C and J.
section 75(2)(f): subject to subsection (3) the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party
The husband has a substantial superannuation benefit, with a current gross value of $305,367. There is no reason to suppose that the growth of this fund will not continue in the future. As noted, there has been a substantial increase in its value during the last four years. The husband thus can look forward to financial security in his retirement.
section 75(2)(o): any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
As noted, the wife’s daughter R received some $71,000 from her superannuation in 2005. The consequence is that neither the husband, C or J can receive any part of that benefit. On the other hand the wife elected to direct this money solely to R, which was her right.
It was also the wife’s right to constitute her three children equally entitled to her estate. She saw fit to invest a power of advancement in her sister, whom she obviously trusted to provide appropriately for C and J. The husband said that he does not enjoy a good relationship with Ms Kordell. He implied that he anticipates difficulty in securing her cooperation in making appropriate provision, from the estate, for C and J.
I gained no impression from Ms Kordell that she would create any such difficulties. On the contrary, I am confident that she will honour her late sister’s wishes. The husband seemed to have difficulty with the fact that Ms Kordell, rather than he, has control of the children’s interest in the estate.
The wife devised two-thirds of her estate to C and J. The children will take their shares at the time in their lives which their mother deemed appropriate. In the meantime, she has empowered Ms Kordell to provide financial support for them.
Having regard to all of these considerations, and weighing these matters against each other, I reach the conclusion that an adjustment of 10% of the net superannuation and non-superannuation property, in favour of Mr the husband, is warranted.
Conclusion
I thus find that the net pool of superannuation and non-superannuation assets should be divided as to 70% to the husband and the balance of 30% to the legal personal representative of the late wife. I was informed that it was common ground that no splitting order can be made in respect of the husband’s superannuation. Obviously, the estate’s entitlement to that superannuation asset can be calculated and an adjustment made to the distribution of the pool of non-superannuation property.
Both parties sought orders for the sale of the Y property. By inference, the husband would retain his savings, furniture, superannuation and the added-back funds paid to his sister. To achieve an overall division of 70%/30%, the proceeds of sale of the Y property must be divided in the proportions of 51% and 49% to the husband and the estate respectively.
These percentages are calculated as follows:
Non-Superannuation Assets
1.
Y property
$610,000
2.
Furniture (H)
$4,500
3.
Savings (H)
$60,541
4.
Added-Back funds paid by husband to his sister
$14,246
Superannuation Assets
4.
T Benefit (H)
$305,367
$994,654
70% of that figure equals $696,258 and 30% equals $298,396. The husband would retain his savings, furniture and superannuation and would be credited with the funds paid to his sister. These amounts total $384,654, thus he requires an additional $311,604 from the proceeds of sale of the Y property to bring up his entitlement of 70%. The estate requires $298,396 from the sale proceeds on account of its entitlement of 30%. These figures equate to 51% and 49% respectively of $610,000 which is the agreed value of the Y property. I can make no allowance for sale costs in the absence of any such evidence.
The husband’s intention is to purchase another property in the Y area, to ensure continuity of schools and social connections for C and J. Understandably, he does not wish to take on a large mortgage at 51 years of age. The orders which I propose to make will give him liquid funds of around $370,000 and a superannuation benefit of approximately $305,400. He would be well placed to purchase a home for himself and the children.
The estate would have liquid funds of around $298,000. Substantial legal costs have been incurred and are likely to continue, given the husband’s Supreme Court litigation. Two thirds of the net sum remaining in the estate will be available for the benefit of C and J before they attain the age of 25 years, at the discretion of Ms Kordell, and thereafter absolutely. I regard this outcome as proper, just and equitable for both parties.
The Costs of the Application in a Case
The husband seeks an order that the estate pay his costs of the application filed on 20 April 2008 on an indemnity basis. The amount sought is $5,599. (exhibit 5)
It is true that the application was wholly unsuccessful, which is a matter relevant to the exercise of discretion pursuant to section 117. On the other hand I accept the submission that the application was made in good faith, with the intention of avoiding a duplication of proceedings and limiting the costs of both parties.
The authorities make clear that indemnity costs are awarded only in exceptional circumstances: In the Marriage of Munday and Bowman 22 Fam LR 321. In that decision Holden CJ cited with approval two passages from the judgment in Colgate Palmolive C. v Cussons Pty Ltd (1993) 46 FCR 225, where Sheppard J set out the usual position with regard to costs orders and some of the circumstances when an order for indemnity costs might be warranted, as follows:
“The authorities were conveniently summarised by Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248. His Honour in that case summarised the position as follows:
2.The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. . .
3.This has been a settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it . . .
4.In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course.
His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis. Some examples which may be of relevance to the present case are 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 (Sales) 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 irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd.
(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 (French J, Fed C of A, 3 May 1991, unreported).
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ratatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e)An imprudent refusal of an offer to compromise.
There is no reason at all to suppose that the application here was made for some ulterior motive or because of some wilful disregard of known facts. On the contrary, I consider that the application was made for a proper purpose. No allegations of fraud were made. There was no loss of time to the court or to the husband. There were no groundless contentions or allegations which should never have been made.
These considerations alone are sufficient, in my view, to reject the application for payment of costs on an indemnity basis. In addition, however, there was no evidence of any costs agreement between the husband and his lawyer. I am thus not able to understand the basis of the calculation of the costs as sought.
For these reasons, I reject the application for payment of costs of the Form 2 application on an indemnity basis. I am persuaded, however, that there should be an order for costs in favour of the husband because the application was wholly unsuccessful. I will order that he receive his costs in the sum of $3,000. This figure is arbitrarily selected, in circumstances where I was given evidence only of the total of the husband’s costs on an indemnity basis.
I certify that the preceding eighty nine (89) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson
Associate:
Date: 24 September 2008
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Civil Procedure
Legal Concepts
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Costs
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Remedies
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Res Judicata
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