Lake and Brand (No 3)

[2014] FamCA 1010

FAMILY COURT OF AUSTRALIA

LAKE & BRAND (NO 3) [2014] FamCA 1010

FAMILY LAW – COSTS – Consideration of circumstances justifying the making of a costs order – Where the wife seeks fixed costs on an indemnity basis in relation to her application in a case – Where the wife relies on the financial circumstances of the parties and the conduct of the husband in the proceedings – Where the husband opposes an order for costs  - Where the husband was wholly unsuccessful in his application – Consideration of the quantum of costs.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

APPLICANT: Ms Lake

RESPONDENT: Mr Brand

FILE NUMBER: MLC 5385 of 2013

DATE DELIVERED: 11 November 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 6 August 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: Wightons Lawyers

RESPONDENT: In person

Orders

(1)That within 90 days the husband pay or cause to be paid the wife’s costs of and incidental to her application in a case filed 4 June 2014 fixed in the sum of $8,000.00 (“the payment”).

(2)That in the event of the husband’s non-compliance with Order 1 hereof, the payment, or so much as remains outstanding, together with interest thereon calculated at the rate prescribed by the Family Law Rules 2004 be paid from the husband’s entitlements pursuant to final property orders.

(3)That the wife’s costs application be otherwise dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lake & Brand (No 3) 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 MELBOURN

FILE NUMBER: MLC 5385 of 2013

Ms Lake

Applicant

And

Mr Brand

Respondent

REASONS FOR JUDGMENT

introduction

1. On 9 September 2014 I made orders and delivered my reasons for judgment in relation to the wife’s application in a case filed 4 June 2014. In that application the wife there sought orders in relation to the application of sale proceeds of the former matrimonial home and for the setting aside of instruments pursuant to section 106B of the Family Law Act 1975. The orders I made provided as follows:-

   1.That order 2(c) of the orders of the Federal Circuit Court made 13 August 2013 be varied to provide that the balance of the proceeds of sale of the property situate at [B Street, C Town] be applied as follows:

   (a)    First as to the sum of $170,000 to reduce the mortgage liability to the Commonwealth Bank of Australia secured over the title of the property at [D Street, E Town]; and

   (b)    Second, the balance then remaining to be held on behalf of the parties in an interest-bearing trust account by the solicitors for the wife until further order.

   2.That pursuant to s 106B of the Family Law Act1975 (Cth) the instrument by which the husband, [Mr Brand] transferred to [Ms A Brand] one ordinary class share in [I Pty Ltd] (ACN …) be set aside.

   3.That pursuant to s 106B of the Act the instrument by which the husband, [Mr Brand] resigned as a director of [I Pty Ltd] (ACN …) and of [H Pty Ltd] (ACN …) be set aside.

   4.That pursuant to s 106B of the Act the instrument by which the husband resigned as a guardian and/or appointor of the [Brand] Family Trust be set aside.

   5.That the husband personally, and in his capacity as a director of [I Pty Ltd] and [H Pty Ltd] do all such acts and things and sign all such documents as may be required to:-

   (a)    Rectify the Register of Members of [I Pty Ltd] to reinstate him as a member of that entity;

   (b)    Be reinstated as a guardian and appointor of the [Brand] Family Trust; and

   (c)    Be reinstated as a director of [I Pty Ltd] and of [H Pty Ltd].

   6.That until further order the husband by himself, his servants or agents be and is hereby restrained from transferring, selling or otherwise dealing with his shareholding in [I Pty Ltd] or any other corporate entity in which he holds a share, and from resigning any office held by him in any company or trust.

   7.That within 14 days the wife file written submissions in support of her application for costs.

   8.That the husband file any submissions in response to the wife’s application for costs within 7 days of service of the wife’s submissions.

   9.That the wife’s application in a case filed 4 June 2014 and the husband’s response to an application in a case filed 18 July 2014 be otherwise dismissed.

2. Pursuant to paragraph 7 of the orders, the wife now seeks an order that the husband pay her costs and that they be paid on an indemnity basis fixed in the amount of $10,250. The wife further seeks that the husband pay the wife’s costs within 90 days of this order and that in the event of default of payment of the said costs, such sum to be paid to the wife from any sum awarded to the husband upon determination of the parties’ competing property applications.

3. The husband opposes the order for costs. In the event that costs are to be awarded, the husband submits that the amount claimed by the wife be reduced in relation to instructing fees and perusal of material and that the payment of any amount be fixed and payment deferred to be adjusted against the husband in the final property division. 

4. The wife, in support of her application for costs relies upon written submissions dated 19 September 2014.  The husband in response relies on written submissions filed on 24 September 2014. 

LEGAL PRINCIPLES

1. The general rule is that each party to proceedings pursuant to the Family Law Act1975 shall bear their own costs. 

2. Section 117(2) provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to the provisions of subsections (2A), (4), (4A) and (5) and the Rules of Court, make such order as to costs and security for costs as the Court considers just. 

3. Section 117(2A) sets out the matters that the Court should have regard to in considering whether to make an order for costs.  Those circumstances are:-

   (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.

THE WIFE’S APPLICATION FOR COSTS

1. In support of her application, the wife principally relies upon the following matters to support her position that the husband pay her costs:-

   b)That the husband has been wholly unsuccessful in the proceedings (s 117(2A)(e));

   c)The conduct of the parties in relation to the proceedings (s117(2A)(c)); and

   d)The financial circumstances of each of the parties to the proceedings (s 117(2A)(a)).

Section 117 (2A)(a) The financial circumstances of each of the parties

1. The wife is engaged in full-time employment as a managing director and partner. Her income from her combined employment consisting of a full-time position with N Services and a part-time position with E Health is approximately $2,050 gross per week.

2. The husband, although a qualified engineer is unemployed and is in receipt of Centrelink benefits in the sum of approximately $256 per week. The husband in his submission in response to the wife’s costs application, states that as a result of the orders I made on 9 September 2014, he will no longer be eligible for those benefits. There is no evidence before the Court in relation to a change to his entitlements or otherwise in respect of those benefits. Despite orders made on 2 July 2014 by Macmillan J that he file a financial statement, the husband has failed to do so.

3. The wife has, since separation and up until settlement of the sale  been responsible for meeting the financial obligations of the parties in respect of the mortgage payments for the former matrimonial home at B Street, C Town.  In addition, the wife has borne the cost of meeting the mortgage payment for the property currently occupied by herself and the parties’ child, F, at D Street, E Town.

4. The husband does not have the expense of accommodation costs for himself and it is his evidence that he lives at the homes of his mother, sister and brother.

5. It is the unchallenged evidence of the wife that she has been solely responsible for the financial expense associated with F’s private school education.  The husband pays no child support for F and in such circumstances the wife is solely responsible for the support of the child.

6. The wife has incurred legal costs in respect of the proceedings before the Court.  The husband in representing himself has not incurred such legal costs.

7. I am satisfied that the payment of her legal costs has been a significant financial obligation for the wife, in addition to the expenses she has been responsible for as identified above. In determining the question of costs, I have taken into account the parties’ financial circumstances generally.

Section 117(2A)(b) Whether either party is in receipt of legal aid

1. Neither party is in receipt of assistance by way of legal aid.

Section 117(2A)(c) The conduct of the parties in relation to the proceedings

1. The wife relies upon the husband’s conduct in relation to the sale of the C Town property and the husband’s attitude towards discovery in support of her application for costs. The wife relies upon the fact that her application in a case was essentially an application necessitated by the husband’s failure to execute a Withdrawal of Caveat in a timely manner in anticipation of the settlement of the sale of the C Town property, which was sold pursuant to orders made in August 2013.  Had the caveat not been withdrawn, the sale of the C Town property may have been compromised; the application for the withdrawal of caveat was necessary to protect the property pool of the parties pending final determination of the matter.

2. The wife’s complaints about the husband’s conduct can be summarised thus:-

   a)The husband was in attendance at the hearing before Judge Hartnett in the Federal Circuit Court on 13 August 2013, albeit his attendance was partial, having left court prior to the conclusion of the hearing. The husband was aware of the application seeking the sale of the former matrimonial home and was served with a copy of the orders made that day. Order 2 of those orders required the sale of the former matrimonial home, and specified that:-

   2.The wife do all acts and sign all documents to sell the property situate at [B Street, C Town] being the land more particularly described in Certificate of Title Volume … Folio … and the proceeds of sale be distributed:

   (a)To pay the selling costs, commission and expense of sale;

   (b)To discharge the mortgage registration number   AC7… to the Commonwealth Bank of Australia; and

   (c)Balance to be held on behalf of the parties in an interest bearing Trust account by the solicitors for the wife until further order.

   b)Approximately eight months after those orders were made, on 10 April 2014, the husband lodged a caveat over the former matrimonial home.  Given the orders made in August 2013 there would seem to have been little basis for that action by the husband.

   c)On 22 April 2014, the wife’s solicitors forwarded to the husband a Withdrawal of Caveat document with a request that the document be executed and returned to the solicitors. The husband did respond to that request.

   d)The husband was given notice by email on 28 May 2014 that an application would be made to the Court to have the Withdrawal of Caveat executed by a representative of the Court.  Further, he was given notice that a costs application would be made in the event that the wife was required to file that application.  The husband acknowledged that email but otherwise did not comply with the request that he remove the caveat.

   e)The wife deposes to some six instances of correspondence forwarded to the husband requesting the Withdrawal of Caveat which were not acknowledged nor responded to by the husband.

   f)The husband in his affidavit filed 18 June 2014 asserted that there was “no Order to sell the [C Town] property”.  In light of the orders made in August, 2013 clearly that statement is incorrect.

   g)In relation to the wife’s application to set aside transactions to defeat claims, the wife submits that the husband engaged in such conduct in order to avoid his obligation to produce discoverable documents with respect to the entities in which he had previously held office. Further, the wife submits that the husband removed himself from his previously held offices in order to forego claims of monies due to either himself as beneficiary of the Trust or to otherwise comply with his obligations for discovery.

   h)The husband’s attitude towards discovery is expressed in paragraphs 17 and 18 of his affidavit filed 12 August 2013 in which he deposes inter alia that:-

   17/

   …

   (4) As one of three directors prior to my resignation I have never had power or control over this Corporate Entity [H Pty Ltd ATF Brand Unit Trust]
   (5) There is no requirement for disclosure of financial documents by by (sic) me to the applicant relating to this Corporate Entity.
   (6) Disclosure of the previous directorship held in [H Pty Ltd] has been made and copies of credit card statements relating to the private use of company funds for period May 2012 to May 2013 have been disclosed. Private use of card ceased on 29^th November 2012.

   18/

   …

   I resigned as a director [of I Pty Ltd] on 29^th November 2012 with which (sic) was registered on the ASIC company database 21 Feb 2013.

   …

   (8) As one of three directors prior to my resignation I have never had power or control of this Corporate Entity.

   (9) Disclosure of information regarding resignation as a director and sale of shareholding in [I Pty Ltd] has been made to the applicant.

3. The husband in his submissions concedes that in relation to the sale of the C Town property, “aspects of [his] conduct were misguided” but submits that this was due to his being “confused and upset, as I felt excluded from the sale process of our former family home and thought I would have an opportunity to have input and negotiation around this process.” The husband further submits that he “simply did not understand [his] requirement to sign the Withdrawal of Caveat”.

4. I am satisfied that the husband’s conduct with respect to the Withdrawal of Caveat is a relevant matter in considering the wife’s costs application.  That the husband did not have legal representation is no shield to an order for costs.  In circumstances where the husband has actively sought to thwart the operation of an order of the court (as is evident from the above chronology) by refusing to provide a Withdrawal of Caveat to enable settlement of the sale to occur, I am satisfied that it is appropriate that the husband meet the wife’s costs with respect to the application necessitated by that conduct.

5. In respect of the wife’s application to set aside transactions made by the husband to remove himself as an officeholder and member of the family company and trust, the husband submits that such resignation “was forced upon me by my family” and that he did not have access to the documents requested.

6. The husband appears to accept no responsibility for his actions with respect to the transfer of the share and resignations executed by him which were set aside pursuant to my orders.  Given that the husband transferred his share in the entity some 5 days after the commencement of family law proceedings, and in circumstances where he had played an integral part in the development of those entities and the value of those entities was clearly a matter in issue between the parties, I am satisfied that the husband’s conduct is relevant to the determination of the wife’s costs application in relation to those proceedings.

Section 117(2A)(d)  Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court

1. Whilst this is not a case whereby the proceedings were necessitated by the failure of a party to a proceedings to comply with previous orders of the Court, the wife submits that the husband was aware that his failure to withdraw the caveat over the C Town property would prevent her from complying with her obligations to sell the property pursuant to Order 2 made 13 August 2013. Given those circumstances the wife submits that she had no alternative course of action but to seek the orders in her application in a case.

2. As noted above, I am satisfied that the husband’s conduct in the face of the orders made 13 August 2013 is a matter to be taken into account in the determination of the wife’s costs application.

Section 117(2A)(e) Whether a party to the proceedings was wholly unsuccessful

1. The husband has been wholly unsuccessful. The husband’s response seeking dismissal of the wife’s application was not granted, and I did not make the orders sought by him. The husband sought an order that the caveat previously withdrawn pursuant to orders made by Macmillan J on 2 July 2014 should be “reinstated”. As the caveat had been withdrawn and the property sold at the time of his application, no order could be made in the terms sought by the husband. Further, the husband’s application that he have “access” to any resultant sale proceeds to enable him to arrange accommodation for himself and F was dismissed.

2. The wife was wholly successful in her applications to vary the orders of 13 August 2013 to provide that a proportion of the sale proceeds be applied to the reduction of the mortgage liability secured over the property at E Town and to set aside transactions by the husband divesting himself of interest in the various Brand entities.

Section 117(2A)(f)   Whether either party to the proceedings has made an offer in writing to the other party to the proceedings and the terms of that offer

1. The wife does not seek to rely on any offer of settlement but does submit that opportunity for the husband to avoid the s106A application regarding the Withdrawal of Caveat was provided through correspondence providing him notice of court proceedings in the event of his failure to execute the Withdrawal of Caveat forwarded to him.  In his submissions, the husband acknowledged his conduct in response to those communications and at paragraph 12 of those submissions concedes that it “will probably lead to a costs order against me regarding the removal of caveat”.

Section 117(2A)(g)  Any other matters the Court considers relevant

1. While the wife acknowledges that the husband is not required to be legally represented it is submitted on her behalf  that the fact that he is self-represented has caused her to incur additional costs in attempting to identify the property pool to enable the Court to make a determination.

2. The wife submits that the husband’s failure to produce requested documents has resulted in additional costs relating to the issuing of subpoena, service costs and conduct money, and engagement of an expert valuer for the purpose of determining the husband’s interest in various corporate entities.

1. The husband maintains that the parties’ liabilities exceed their assets; he has not “chosen” to remain unrepresented in the proceedings but rather has been unable to engage solicitors due to his financial position.  He submits that in the event that costs are ordered against him that they be reduced and deferred to be adjusted against any amount payable to him in the final property proceeding.

2. As noted above, the husband has failed to comply with Court orders requiring him to file a financial statement.  That failure has meant that I am not in a position to assess his current financial circumstances.  What I am left with are the husband’s assertions as to his alleged parlous financial circumstances;  those assertions are made against a backdrop where I have found that he has executed documents, the effect of which has been to remove assets from the reach of the Court.

3. Until the parties’ separation the husband was working as an engineer in his family’s business.  Since that time he has borne little financial responsibility for the preservation of the parties’ assets or the care of their child.

4. Having regard to all of those circumstances I am satisfied that a costs order in favour of the wife is warranted with respect to her successful applications.

QUANTUM

1. The wife’s application is that the husband pay her costs in the sum of $10,250.  Such an application is made on an indemnity basis. 

2. The Full Court said in the decisions of Kohan and Kohan (1993) FLC 92-340 and Prantage and Prantage [2013] FamCAFC 105, that for an order for indemnity costs, it is necessary for the Court to make a finding of exceptional circumstances. As was noted in Kohan, to make such an order is “a very great departure from the normal standard”.  I am not satisfied that the circumstances of this case justify a departure from the normal standard.  Other than the order requiring that he file a financial statement, the husband has not breached orders of the court.  Whilst his conduct frustrated the implementation of the orders for the sale of the C Town property, I am not in a position to find that that conduct is an exceptional circumstance as contemplated in Kohan.

3. Further, Rule 19.08(3) of the Family Law Rules 2004 (Cth) requires that a party applying for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs, and if so, the terms of the costs agreement. I am not informed as to whether the wife is bound by a costs agreement.

4. Rule 19.18 of the Family Law Rules 2004 (Cth) provides that the Court may make an order for costs:-

   (a)Of a specific amount;

   (b)As assessed on a particular basis (eg Lawyer and client, party/party or indemnity);

   (c)To be calculated in accordance with the methods stated in the order; or

   (d)For part of the case, or part of an amount, assessed in accordance with Schedule 3.

5. For the reasons set out earlier in this judgment I am satisfied that the circumstances of the case justify a departure from the general rule that each party bear their own costs.

6. Whilst the husband asserts that he is not currently working, I am satisfied that he has qualifications and training that provide him with an income earning capacity.  Further, having regard to the evidence of the wife with respect to the parties’ financial circumstances, which although untested indicates that the parties have interests in real property as well as the corporate entities to which I have already referred, I am satisfied that the husband is likely to have funds available to him at the conclusion of the parties’ competing property applications.

7. The wife has incurred significant costs in having to engage a solicitor and brief counsel to represent her on two occasions.  On the first occasion the matter was listed, the husband did not appear at that hearing although his sister was in the body of the Court on that occasion.  Whilst I am not in a position to make a finding as to the motivation for the husband’s actions, one possible interpretation of the husband’s conduct with respect to those applications is that he has endeavoured to frustrate and delay the progress of the wife’s application for final property settlement. 

8. Having regard to the history of this matter, I do not consider it appropriate to order that the wife’s costs be assessed. To do so may result in further unnecessary expense and delay. The submissions filed on behalf of the wife provide a helpful summary of the costs incurred on behalf of the wife with respect to the proceedings. Having regard to that summary and Schedule 3 of the Family Law Rules 2004 I am satisfied that it is appropriate to fix the wife’s costs in the sum of $8,000.00. I will provide time for the husband to satisfy that order. In the event of the husband’s default of that order, that sum, together with interest thereon calculated in accordance with the Family Law Rules 2004 shall be deducted from the husband’s final property settlement.

9. Accordingly, the orders I make are as follows:-

   (1)That within 90 days the husband pay or cause to be paid the wife’s costs of and incidental to her application in a case filed 4 June 2014 fixed in the sum of $8,000.00 (“the payment”).

   (2)That in the event of the husband’s non-compliance with Order 1 hereof, the payment, or so much as remains outstanding, together with interest thereon calculated at the rate prescribed by the Family Law Rules 2004 be paid from the husband’s entitlements pursuant to final property orders.

   (3)That the wife’s costs application be otherwise dismissed.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 11 November 2014

Associate:

Date:  11 November 2014