Lindner and Lindner

[2017] FamCA 498

FAMILY COURT OF AUSTRALIA

LINDNER & LINDNER [2017] FamCA 498

FAMILY LAW – COSTS – Where Orders were made in 2013 for the husband to make a payment of a specified sum to the wife – Where the husband appealed the orders and was unsuccessful – Where the wife seeks a stay of the order that she transfer jointly owned shares to the husband pending payment of the sum owed to her in addition to costs for the substantive proceedings and her costs application – Where it is found that the husband has failed to comply with previous orders – Orders made for the husband to pay to the wife $50,000 for her costs of the substantive proceedings and her application for costs – Where the money owed to the wife is to be paid from the sale of shares.

Family Law Act 1975 (Cth) ss 75(2), 117(2A)
Family Law Rules 2004 (Cth) r 19.08

Lenova & Lenova (Costs) [2011] FamCAFC 141
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184

APPLICANT: Ms Lindner

RESPONDENT: Mr Lindner

FILE NUMBER: SYC 3553 of 2011

DATE DELIVERED: 17 July 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 12 July 2017

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Uther Webster & Evans

SOLICITOR FOR THE RESPONDENT: Diana Perla & Associates

Orders

IT IS ORDERED

1. That the funds raised by the sale, pursuant to Order 4 made on 17 December 2013, of the shares held by the husband and the wife in J Limited and B Limited, be paid in the following manner and priority:

   (a)The sum of $41,142, together with interest from the due date at the rate prescribed by the Family Law Rules, to the wife.

   (b)    The sum of $23,575 to the wife, being costs of the Appeal.

   (c)The sum of $50,000 to the wife by way of costs of the substantive proceedings.

   (d)    The balance to the husband.

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 Linder & Linder 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).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:

Ms Lindner

Applicant

And

Mr Lindner

Respondent

REASONS FOR JUDGMENT

1. On 17 December 2013, I delivered Judgment and made Orders in property proceedings between Ms Lindner (“the wife”) and Mr Lindner (“the husband”). In broad terms, the Orders required the husband to pay to the wife the sum of $41,142 and transfer to her all of the funds held in a controlled monies account. If the husband did not pay the specified sum by the due date, that being within 30 days from the date of the Orders, jointly owned shares in J Limited and B Limited were to be sold and the amount paid from the proceeds of the sale. The Orders also provided for the wife to transfer to the husband her interest in their joint self-managed superannuation fund.

2. The relevant Orders (but not the whole of the Orders) are reproduced here:

   (1) That the husband and the wife do all acts and things necessary to pay to the wife the whole of the money in the controlled money account.

   (2) That within 30 days of these Orders, the husband shall pay to the wife the sum of $41,142.

   (3) That upon payment to the wife of the sum referred to in Order 2, the wife shall sign such documents as are tendered to her by the husband to effect the transfer to him of the jointly owned shares in [J Limited] and [B Ltd] (“the shares”).

   (4) That in the event that the sum referred to in Order 2 is not paid to the wife within the time specified, then the parties shall forthwith do all acts and things required to sell the shares and to pay from the proceeds of the sale the sum owed to the wife, together with interest at the rate prescribed by the Family Law Rules 2004 (Cth), and to pay the balance to the husband.

   (5) That the wife shall forthwith do all acts and things and sign all documents tendered to her by the husband in order to transfer to the husband all of her right, title and interest in the self-managed superannuation fund known as the “[C] Superannuation Fund” (“the superannuation fund”).

3. The husband appealed those Orders. His appeal was unsuccessful. He was ordered to pay the wife’s costs of the appeal. The costs of the appeal have been assessed at $23,575.

4. On 16 August 2016, the wife filed an Application in a Case seeking, firstly, that the husband pay her costs of the substantive trial proceedings and of her application for costs and, in addition, an order in the following terms “That Order 3 … be stayed pending payment by the Husband of the costs of the Appeal EA14/2014 and pending the payment by the Husband of any costs order made pursuant to this Application.”

5. The husband filed a Response seeking that the wife’s Application in a Case filed 16 August 2016 be dismissed.

6. Directions were made for the filing of affidavits and written submissions in relation to the Application in a Case. The wife relied on an affidavit sworn on 15 August 2016. The husband relied upon an affidavit sworn 22 September 2016 and a Financial Statement sworn the same date. Both parties filed written submissions.

7. In the course of submissions, the solicitor for the wife indicated that she sought costs on an indemnity basis. That submission was abandoned.

8. The application for costs falls to be determined according to the provisions of section 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) which are set out below:

   (2)  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), (4A) 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.

   (2A)  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.

9. No reliance is placed by either party on subsection (2A)(b).

The respective financial positions of the parties

1. As a consequence of the Orders made on 17 December 2013, the wife received net assets of $785,795. A total of $581,681 was received from the controlled monies account. The husband was also ordered to pay her $41,142, but that sum has not been paid. In her affidavit sworn 15 August 2016, the wife deposed to her then current financial circumstances. After the payment of legal costs, debts and living expenses, she had $15,716 remaining from the money she received from the controlled monies account pursuant to the Judgment. In 2016, she received an inheritance from her late mother from which she has retained $1,027,018. She has worked since January 2015 on a permanent part time basis and earns $38,413 per annum. She deposed to weekly living expenses of $1,962.

2. The wife filed a Financial Statement which she swore on 7 July 2017. She deposed that she has purchased a home and has about $106,000 in bank accounts.

3. The husband filed a Financial Statement sworn 22 September 2016. He deposed to income of $2,900 per week from his business and expenses exceeding that amount.

4. The value of his superannuation interest, the self-managed C Superannuation Fund, is stated as “Not known”. The superannuation fund was the subject of considerable evidence in the trial and no accounts have been prepared since 2007. At trial the gross value of the fund was found to be $348,173. It was a non-compliant fund. The husband rejected the proposition that the accounts be prepared, the fund brought into compliance, the tax paid and the net value of the fund be ascertained. It would appear that the superannuation fund, of which the husband is the sole beneficiary pursuant to the Orders, remains in the same position as it was at trial.

5. He deposed to a modest sum in the bank and valued his interest in his business as “Nil”. As was the case at trial, there was no disclosure of the work in progress or debtors of the business.

6. The husband, at the commencement of submissions, tendered tax returns and assessments and profit and loss statements of the unit trust through which he operates his business. Those documents had only been made available to the solicitor for the wife shortly before the tender and no supporting documentation was provided.

7. The Orders require the wife to transfer to the husband her interests in a parcel of 22,322 shares in B Limited (“the B shares”) which, at trial, were valued at $160,495, and a parcel of shares in J Limited which, at trial, were valued at $2,382. Those shares are still jointly held but, pursuant to the Orders, they are beneficially owned by the husband, but subject to the provisions of Order 4.

8. In his Financial Statement sworn on 22 September 2016, the husband deposed that he owed the Australian Taxation Office $620,000 and has debts outstanding for his own legal fees and for credit card expenses.

9. In addition to those debts, he has a debt to the wife of $23,575 for the costs of the unsuccessful appeal.

10. Although I can comfortably find that the wife’s financial position is superior to that of the husband, I am in little better position than I was at the trial to know what the income of the husband’s business, and thus husband’s income, really is.

The conduct of the proceedings

1. There is no dispute that the husband did not comply with his obligation to make full disclosure. So much is conceded in the submissions filed on his behalf. In submissions, he seeks to rely on his assertion that he was depressed.

2. Whatever might have been the reason for the husband’s failure to comply with his obligations, it was the wife who was put to the cost of finding the evidence that he should have voluntarily produced.  

3. Because of the husband’s failure to provide evidence that was peculiarly within his knowledge, the wife was forced to issue numerous subpoenas and instruct an accountant to attempt to reconstruct, from material produced on subpoena, the records of the superannuation fund.

4. Additionally, some of the aspects of the husband’s case, such as his assertion that the wife had colluded with real estate agents to sell the former matrimonial home at an undervalue, in relation to which the husband adduced no admissible evidence, required the wife to file affidavit evidence from the relevant professionals.

5. The wife relies on the husband’s failure to comply with various orders and directions made before the commencement of the trial, commencing with his failure to comply with an order to remove the caveat he had lodged over the former matrimonial home. The wife was obliged to file an Application in a Case to effect the removal of the caveat.

6. Directions were required in relation to the husband’s failure to comply with Orders made on 19 April 2012 on five separate occasions in the following 14 months.

7. The husband failed to file his trial affidavits as directed by 16 August 2013 requiring the call-over to be adjourned.

8. There is no doubt that the husband’s persistent failure to comply with Orders have increased the wife’s costs. It is not, however, possible to accurately identify the quantum of the increase.

9. There was, properly, no suggestion in the husband’s case that applications for costs in relation to the various applications in a case to which the wife referred were out of time. The provisions of Rule 19.08 of the Family Law Rules 2004 (Cth) make it clear that an application for costs of interim proceedings can be made 28 days after the making of final orders.

10. In his defence, the husband submits that the wife’s conduct was also found wanting. He cites a number of instances where the wife’s evidence was not accepted, after having been tested in cross-examination. However, he does not suggest that his costs were increased by reason of her evidence not being accepted.

Whether proceedings necessitated by failure to comply with previous orders

1. The husband’s failure to comply with previous orders made by the Court is addressed at above paragraphs 25 to 27.

2. In his affidavit sworn 22 September 2016, the husband deposed, “I admit that there were certain proceedings necessitated by my failure to sign documents or provide documents…”

3. Also in his affidavit, the husband deposed “I admit that I did not always comply with Directions of the Court in relation to filing of material.”

Whether a party was wholly unsuccessful

1. In his affidavit sworn on 22 September 2016, the husband admitted that he was wholly unsuccessful in the proceedings.

Offers of settlement 

1. On 14 December 2012, a letter was forwarded to the solicitors for the husband making an offer of settlement, broadly in the following terms:

   ·    That the wife receive the whole of the funds in the controlled monies account;

   ·    That the wife’s interest in the C Superannuation Fund be transferred to the husband;

   ·    That shares held jointly be equally divided;

   ·    That the husband indemnify the wife in respect of any liability of the superannuation fund and any loan account she might have;

   ·    That they enter into a Binding Financial Agreement to the effect that the wife will make no claim for spousal maintenance.

2. On the basis of the wife’s then understanding of the asset pool, she calculated that the offer represented 53.5 per cent of the pool and that, at trial, she would seek 60 per cent of the pool.

3. There is no evidence of the husband’s response to that offer or of any counter‑offer.

4. The husband in his affidavit sworn 22 September 2016, deposed “I admit that the Wife made an offer in writing to me in December 2012, that had I taken it, I would have been in a better position than I am now.”

5. On behalf of the husband it was submitted that the husband could not have foreseen that a number of aspects of his case would be rejected. I do not accept that submission. The facts of the husband’s case were known to him and him alone. His lawyers, properly instructed, were in a position to make the same objective assessment of the consequences of those facts as was the Court and, ultimately, the Full Court.

6. The wife made an offer of settlement. The husband did not accept it. She received more than the sums for which she offered to settle.

Other relevant matters

1. The husband submitted that, insofar as the Court had found that he had failed to make proper disclosure or to put relevant evidence before the Court, those failures had been taken into account in the s 75(2) adjustment and in the decision to treat the tax liability and the contingent liability of the superannuation fund, consequent on its non-compliance, as liabilities solely of the husband.

2. It was submitted that, to look again at those matters, would constitute a “double dip” against the husband.

3. Whilst that submission is correct as far as it goes, it does not take account of the fact that, because of the husband’s failure to comply with orders made by the Court, his failure to make full disclosure and his failure to put relevant evidence, available particularly in his control, before the Court, the wife incurred unnecessary costs. She was obliged to do more work, such as issuing subpoenas, to engage forensic accountants and to file Applications in a Case. The proceedings were adjourned on a number of occasions because of the husband’s failure to do that which he had been specifically ordered or directed to do. Those costs are not taken into account in the s 75(2) adjustment and the orders to which reference is made in the husband’s submissions.

4. To that extent, there is no “double dip” in taking those matters into account in the application for costs.

5. Finally, the husband relied upon the fact that he had been left with substantial debts and no assets other than a right to the shares, subject to the provisions of Order 4. The sum referred to in Order 2 was not paid within the time specified and has not yet been paid. Therefore the provisions of Order 4 are enlivened and the parties are required to sell the shares.

6. In Lenova & Lenova (Costs) [2011] FamCAFC 141, the Full Court held, at [10] to [13]:

   In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subs (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.

   A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation.  Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs. 

   That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations.  But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

   Whilst regard is had to the financial circumstances of the respondent wife, she was advised by legal practitioners at each stage of the proceedings. She can, in our view, be seen to have known the risks of refusing to compromise in the face of a written offer made before the appeal was filed. That factor, together with the husband’s success in the appeal warrant an order for costs being made in favour of the husband.

7. I accept that the husband’s capacity to pay an order for costs is very limited but, on the assumption that the shares are of no less value than they were at trial, they will realise about $162,900 less selling costs. There may also be a capital gain which will have tax implications for both parties.

8. The sum of $41,142 is to be paid from the proceeds of sale of the shares and it is reasonable to assume that the costs of the appeal, $23,575, will also be paid from the proceeds, leaving about $98,000 less selling costs and capital gains tax, as the property of the husband.

CONCLUSION

1. The wife has paid costs in the substantive proceedings (excluding the appeal) of $388,409.01. Those costs were rendered on the basis of costs agreements and not in accordance with the scale provided by the Family Law Rules.

1. The wife’s costs included $70,000 paid to her forensic accountant.

2. It can be assumed that the wife’s costs, even at scale, would be substantial.

3. The weight of the considerations mandated by s 117(2A) of the Act requires that the husband should make a contribution towards the wife’s costs.

4. I am reluctant to put the parties to the expense of a costs assessment. It was agreed by both legal representatives that, if I determined that it is appropriate for the husband to pay some part of the wife’s costs, I am able to arbitrarily fix the amount.

5. A fund exists from which a sum could be paid, that is the husband’s interest in the proceeds of sale of the B and J Limited shares.

6. The powers of the Court in relation to costs are extremely broad.

7. In Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184, Gaudron J said:

   The power conferred by s 117(2) of the Family Law Act 1975(Cth) (the Act) is a power to "make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just." That power is not simply a power to make an order for costs. Were it so, it would only authorise orders to indemnify for "costs actually incurred in the conduct of litigation". However, a power to make an "order as to costs" is a broader power. And when regard is had to the consideration that s 117(2) expressly authorises interlocutory orders, that sub-section must, in my view, be construed as authorising orders requiring a party to proceedings under the Act to provide another party with funds to conduct those proceedings.

   Doubtless, the power to award maintenance under s 74 of the Act also extends to orders that a party to the marriage provide the other with funds to conduct proceedings under the Act. I mention this matter because, as between parties to a marriage who are also parties to litigation, an order to provide funds for the conduct of litigation as to their mutual rights and obligations is as aptly described as a maintenance order as an "order as to costs". And it may be that, in the absence of statutory power either as to costs or maintenance, a superior court has inherent power in proceedings between de facto couples to make an order that one party provide the other with funds to conduct proceedings, if that is necessary to enable the proper conduct of litigation with respect to their property. And in that situation, an order might as easily be described as a mandatory injunction or an order for interim provision as an "order as to costs".

   One other matter should be noted with respect to s 117(2), namely that its terms are, if anything, wider than the bare power "to award costs" considered in Knight v FP Special Assets Ltd. Accordingly, it follows that the sub-section authorises orders against persons who are not parties to proceedings in the exceptional circumstances in which that course is appropriate. At least that is so if the order is one which indemnifies for costs actually incurred, an order of that kind being properly described as an "order as to costs".

   Notwithstanding the width of the power conferred by s 117(2) of the Act, an order under that sub-section must, as Hayne J points out, be an "order as to costs [or] security for costs…". (Footnotes omitted)

8. Having found that it is appropriate that the husband pay a sum of money for the wife’s costs, there is no fetter on the machinery by which that sum is to be paid.

9. I propose to order that, from the proceeds of sale of the B and J Limited shares, the husband cause to be paid to the wife the sum of $50,000. This will represent his contribution towards the wife’s costs for the substantive proceedings and her application for costs.

THE STAY APPLICATION

1. The wife asks the Court to stay the operation of Order 3 pending the payment by the husband of the costs of the appeal.

2. In submissions it became clear that, what the wife wanted, was to secure the payment of the costs of the appeal, and any costs ordered to be paid in consequence of this application, against the proceeds of sale of the shares.

3. There was no real opposition to that course from the husband.

4. The orders will provide for all the amounts owed to the wife by the husband to be paid from the sale of the B and J Limited shares and the balance paid to the husband.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 17 July 2017.

Associate:

Date:  17/07/2017