Kouvades & Kouvades & Anor (No 2)

[2016] FamCA 315

FAMILY COURT OF AUSTRALIA

KOUVADES & KOUVADES AND ANOR (NO 2) [2016] FamCA 315

FAMILY LAW – COSTS.

Family Law Act 1975 (Cth)

Colgate-Palmolive Company v Cussens Pty Ltd (1993) 46 FCR 225
Munday v Bowman (1997) FLC 92-784

APPLICANT: Ms Kouvades

RESPONDENT: Mr Kouvades

INTERVENOR: Mr B Kouvades

FILE NUMBER: MLC 10329 of 2015

DATE DELIVERED: 5 May 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By way of written submissions

SUBMISSIONS RECEIVED FROM:

THE APPLICANT: Lander & Rogers

THE RESPONDENT: Kenna Teasdale Lawyers

THE INTERVENOR: Septimus Jones & Lee

Orders

1. That the husband pay the wife’s costs of and incidental to the applications in a case filed 26 February 2016 and 10 March 2016 respectively in an amount to be agreed and failing agreement as assessed.

2. That the issue of any application for the costs of the second respondent is reserved to be determined by the trial judge. 

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kouvades & Kouvades and Anor (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 10329  of 2015

Ms Kouvades

Applicant

And

Mr Kouvades

Respondent

And

Mr B Kouvades
Second Respondent

REASONS FOR JUDGMENT

1. These reasons concern two applications for costs.

2. The first application is made by Ms Kouvades (“the wife”) against Mr Kouvades (“the husband”) in relation to two applications filed on 26 February 2016 and 10 March 2016 respectively.

3. The husband opposes any orders being made or, in the alternative, that costs should be reserved so that at that future time, the husband’s capacity to pay can be determined.

4. The second application is made by Mr B Kouvades (“the second respondent”).  He seeks an order for costs against the wife in such sum “to be fixed in the discretion of the Court”.

5. Each of those matters needs to be dealt with separately.

6. The background of the application for costs by the wife can be seen in the reasons for judgment that I delivered with orders made on 3 March 2016.  There I said:

   2.All parties agree that the payment be made to the wife.  In my view it should be treated as litigation funding. The issue for determination is not whether the payment should be made but what it is to be called; that brings into question the power of the court to make orders.

   3.The husband and wife are litigating over both property and parenting issues. Because some of the legal property interests of the husband (known as the investment properties) are held mostly in a joint arrangement with his brother, that person was joined as a party by the wife. The brother has not sought to be removed from the proceedings.

   …

   5.The parties have limited property interests, the value of which is yet to be clarified. On any view however, there are disputes about what is to be divided, who owns what legal interests and what entitlement the wife might have.

   …

   7.The husband’s response pleaded that the home should be sold and the wife have 35 per cent of the net proceeds. Mathematically therefore, the wife’s underlying entitlement to cash would be about $100,000 (on the husband’s scenario). There would be no prospect of the wife obtaining the unencumbered home.

   8.To compound things, the husband’s brother is now embroiled in the dispute and (it would seem) may have to assist the husband to borrow money (if the husband’s position is not right) and/or participate in the sale of real property to meet whatever entitlement the wife might ultimately have.

   9.The application in a case filed by the wife on 26 February 2016 was before the Court as were a number of paragraphs from the interim orders sought within the wife’s initiating application. Those latter orders were not pursued. The application in a case sought a variety of orders which included a payment to the wife of $200,000. Sensibly, based on the fixed positions of the parties as just described, that did not proceed. That is not to say it will not be brought again if the wife has more evidence than at present. The evidentiary problem associated with the partial property application was also curious because disclosure orders were made in December 2015 and (it would seem based on a concession of the husband’s counsel) they have not been complied with.

   10.When pressed, the wife’s counsel indicated that the wife did not know why compliance had not occurred. When pressed, counsel for the husband said that his client had some difficulty getting the documents (apparently from his bank) and agreement had been reached that he would now solve that. Why that was necessary remains a mystery. The disclosure obligation on all parties is absolute. To cure her problem, the wife sought an order that if the husband did not meet the obligation, she should have the right to issue subpoenae and claim the costs (on a self-executing and indemnity basis) against the husband. That cost controversy has been covered by a simple adjournment giving the parties leave to discontinue if obligations are met. If they are not, formal orders for the issue of subpoenae can be considered including issue of costs. As I indicated it would be hard to see a situation where costs would not follow that event but it may be that in the unusual circumstances of this case, the husband has trouble with his bank. If that is the case, presumably, the wife will have trouble with the same bank in respect of seeking the same information under subpoena.

7. Notwithstanding the orders that were made on 3 March 2016, a further application was made by the wife on 10 March 2016 because the execution of the order arising out of the determination on 3 March 2016 had not been concluded.

8. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that in proceedings under the Act, each party shall bear their own costs unless (subject to certain irrelevant considerations here) there are circumstances to justify a departure from that principle. If the court is contemplating such a departure from that principle, it must take into account the matters set out in s 117(2A).

9. The justifying circumstance here was asserted to be that the wife required an interim disbursement of funds to continue the legal proceedings, there were accrued arrears on a loan for which both parties were responsible but only the husband was in a position to pay, the husband had had an obligation to make full and frank disclosure and ultimately, in respect of the execution of the orders of 3 March, the husband had to sell the shares forthwith and had not done so.

10. In response, it was submitted on behalf of the husband that the wife’s application was ill-conceived and improperly founded and that ultimately, in respect of the sale of the shares required by the orders of 3 March 2016, the order was silent as to any particular compliance date.  That argument has no merit because the silence in respect of any date must mean forthwith.  In addition, it was submitted that the Court should not depart from the principle because both parties had delayed in respect of their obligations to provide full and frank disclosure.  In the case of the wife, it was asserted that she was still providing disclosure as late as 17 March 2016 which is obviously well after the judgment to which I have referred.

11. There is clearly a mix of issues here. The main reason why I am satisfied that it is justifiable to depart from the principle in s 117(1) is the fact that whichever way matters are characterised, they were relating to the enforcement of either orders or obligations. I do not accept that the husband was doing the best he could but even if he was, the wife was entitled to bring the enforcement application. For the reasons I had earlier set out, the wife’s application may have been misguided rather than ill-conceived but that might be attributable to the fact that discovery had not been completed. When the matter was ultimately litigated, it was common ground that the only money that was readily available, and at the fingertips of the husband, was the shares. Even there, the parties could not reach agreement as to what should happen to the money and orders were necessary. I am satisfied that the husband’s approach was unrealistic bearing in mind the limited amount of money involved and the absence of fulfilment of his obligations.

12. The justification for making an order however must not ignore the fact that the Court is obliged to contemplate the provisions of s 117(2A) before making any order.

13. In respect of the financial circumstances of the parties, the wife pointed to the fact that based on the husband’s own evidence, the assets for division only just exceed $1.1 million.  I have already found that the husband is in a stronger financial position than the wife and he controls the major assets of the parties albeit with his brother.  The same reasons for judgment indicated that the husband had the benefit of a generous family in respect of his costs.  The wife has no apparent capacity to pay her costs.  In my view, the financial circumstances of the parties are as I had set them out.  In any event, financial circumstances of the parties are simply one basis upon which the Court should consider making an order for costs.

14. Section 117(2A) also requires the Court to consider the conduct of the parties. Whilst the submission of the wife referred to material in less than flattering terms, as to what the husband told the wife, the reality is that the focus of the Court must be on the husband’s conduct as a litigant. Whatever his intentions were, the fulfilment of obligations in relation to discovery were not complete and ultimately, there was the question of having to issue proceedings for enforcement of the order for the sale of the shares which in my view, could only be read as being sold forthwith.

15. Section 117(2A) also requires the Court to consider whether the proceedings were necessitated by the failure of the husband to comply with previous orders. Discovery orders were made on 8 December 2015. The husband failed to comply. Further orders were made before Stevenson J on 13 January 2016 specifically in relation to the orders from 8 December 2015. The proceedings before me were of a similar nature. The application in relation to the sale of the shares arising out of the 3 March 2016 orders could only be said to have been either a deliberate defiance by the husband or an indifferent approach to his obligations. Either of those situations can be considered at trial because each may go to credit. However, I am satisfied that the wife had to issue the proceeding for a variety of reasons but the main focus was on discovery and the non-compliance.

16. In respect of his position, the husband submitted that the husband has complied with orders to the best of his ability.  It was submitted that where he had had difficulty obtaining required documents, he provided an authority to the wife and her solicitors to view online banking accounts for all the bank accounts in his name.  That only arose as a result of the proceedings.  The primary obligation is still upon the husband to provide the documents.

17. Certainly, as the reasons of 3 March 2016 indicate, some of the wife’s proposed orders were the subject of the consent of the husband.  In my view, that should be taken into account because the wife was successful but it was the necessity to come to court that gave rise to the making of those orders.

18. An order for costs is not intended as a punishment but rather to compensate the party who, by necessity, has to litigate to enforce rights.  Even were there other matters in the application than the specific matters in relation to enforcement, the application was still necessary for the wife to bring.

19. The question of whether someone is wholly unsuccessful or not is another matter that the Court is obliged to take into account.  It is but another factor and for the reasons to which I have just referred, whilst the wife was able to obtain consent orders, it was still the fact that she had to issue the proceedings that gives rise to the costs.  The Court should conclude that in respect of the matters to which a consent was achieved, had there been no other issues, those matters would have been concluded outside of court and absent any formal application.

20. In my view, the wife has satisfied the Court that it is just to make orders for costs arising out of both of her applications filed on 26 February 2016 and 10 Mach 2016.

21. The next issue relates to the question of the nature of the order for costs.  The husband opposes any order but otherwise seeks that any costs should be reserved.  It would seem on the submission of the wife that the first issue relates to an order for indemnity costs.  As the solicitor for the wife mentioned, indemnity costs are the exception rather than the rule.  Reference was made to Colgate-Palmolive Company v Cussens Pty Ltd (1993) 46 FCR 225 in which Sheppard J provided a number of examples in which some form of indemnity costs should follow. That was picked up by Holden CJ in Munday v Bowman (1997) FLC 92-784. None of the matters to which either of those decisions referred seems to fit comfortably here. Whilst the husband was recalcitrant in respect of his fulfilment of obligations, the wife too was pursuing issues that ultimately, could not proceed. That sort of conduct was not something that fits comfortably within any of the items mentioned by the judges in those two decisions. In my view, this is not a case in which indemnity costs should be ordered.

22. The next position that the wife adopted was that an order should be made for $23,900 or thereabouts in relation to solicitor and client costs and failing that, in the alternative, an order for costs which I understand to be about $18,000 in respect of the scale.  It is not necessary for the Court to try and work out what is appropriate having regard to the fluid nature of the proceedings as I have indicated.  In my view the appropriate course of action is for the Court to order that the husband pay the wife’s costs associated with the two applications by an amount to be agreed and failing agreement as assessed.

23. The second issue relates to the question of the claim by the second respondent for costs against the wife.  The second respondent has incurred $34,027.95.

24. It is submitted on behalf of the second respondent that upon an objective analysis of the issues which were set out in the submission, the wife did not need to join the second respondent.  She was effectively making in the eyes of the second respondent, an ambit claim that had not been thought through sufficiently.

25. It was also submitted that the wife had sought discovery from the second respondent that should have been dealt with by subpoena.

26. In respect of both of those two principles, I disagree with the submission. The second respondent had to be joined in these proceedings because apart from anything else, there was a claim against property in which he had “an interest” and there was no indication that he would simply abide by any order of the Court. The second issue is that discovery in circumstances where the second respondent was a party, should not have been by way of subpoena but by way of voluntary provision. As I said at paragraph 22 of the reasons for judgment, this was a case where there were technical issues as to ownership as well as questions of the assessment under the provisions of Part VIII of the Act.

27. The submission on behalf of the second respondent was that he works as an accountant and that the husband owed him money.  The submission of the second respondent went on to say that the wife has now formally withdrawn all claims against him as is noted in the orders of 1 March 2016.  It was suggested that as there was no longer any such relief sought, he should be released from the proceeding.  I am not dealing with an application for his discharge and certainly I would not treat this application as an application of that nature.

28. Section 117 of the Act applies for the same reasons as earlier set out. In my view, it is difficult to assess whether the application by the wife against the second respondent was a folly or whether her ignorance of the situation, because of the lack of discovery, created some uncertainty. It would seem that the legal position at least on its face, justified the wife (if not obligated her) to do what she did.

29. Notwithstanding the question of whether or not the respondent needs to be a party to the proceedings any longer, I do not feel that the Court is in a position to make a finding about whether the joinder was unnecessary in these circumstances.  The appropriate course of action is therefore to reserve the question of costs of the second respondent to any trial.  If indeed the second respondent is released or discharged from these proceedings, a comprehensive application for costs can then be made.  Otherwise, the matter can be dealt with at trial.

I certify that the preceding Twenty Nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 5 May 2016.

Associate: 

Date:  5 May 2016