M and M
[2001] FMCAfam 140
•8 October 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2001] FMCA fam 140 |
| COSTS – Security for costs – Factors to be taken into account when determining whether to make an order for security for costs – Section 117 Family Law Act 1975. Luadaka v Luadaka (1998) FLC 92-830 Brown and Brown; Eley and Henty (Interveners) (1991) FLC 92-265 |
| Applicant: | P M |
| Respondent: | K A M |
| File No: | ZH2081 of 2001 |
| Delivered on: | 4 September 2001 |
| Delivered at: | Hobart |
| Hearing Date: | 29 August 2001 |
| Judgment of: | Roberts FM |
REPRESENTATION
| Counsel for the Applicant: | Mr. Hay |
| Solicitors for the Applicant: | Clerk Walker & Stops |
| Counsel for the Respondent: | Ms. Badenach |
| Solicitors for the Respondent: | Ogilvie McKenna |
ORDERS
That the application for security for costs contained in the Response filed 25 May 2001 by PJ M be and is hereby dismissed.
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT HOBART
ZH 2081 of 2001
P M
Applicant
And
K A M
Respondent
REASONS FOR JUDGMENT
Background
The matter before the Court is an application by P M, who was formerly married to K A M. Because these proceedings arise out of their marriage, I shall refer to them as “the Husband” and “the Wife”, notwithstanding that they are divorced.
Orders were made by consent in the Family Court of Australia on
3 November 1995 following the filing of an Application for Consent Orders.
On 9 February 2001 the Wife made an application pursuant to Section 79A of the Family Law Act seeking to vary the Consent Orders of
3 November 1995.
In his response to that application, the Husband sought, inter alia, an order that the Section 79A Application be summarily dismissed and an order for a payment of $10,000.00 for security for costs.
The Application for Summary dismissal of the application came before me on 7 June 2001 and my Judgment in relation to that was delivered on 9 July 2001. This Judgment can be read in conjunction with that Judgment so I need not restate many of the facts.
Application
The application now before the Court is the application that the Wife pay $10,000.00 to the trust account of the Husband’s solicitors as security for costs. When the matter was argued, counsel for the Husband indicated that he would have no objection to an order that such a sum be paid into Court or that other security, such as a bank guarantee, be given.
Both counsel made detailed submissions in relation to the law and referred to a number of decided cases.
The law and findings
Both counsel stated that power of the Court in relation to security for costs is to be found in Section 117 of the Family Law Act 1975. Subsection (2) of that Section makes provision for orders for security for costs. However, it is quite clear that subsection (1) must apply. So far as this case is concerned, that subsection states that “Subject to sub-section (2) each party to proceedings under this Act shall bear his or her own costs.”
Subsection (2) of that section provides that if the Court is of the opinion that there are circumstances that justify it, the Court may make such order as to costs and security for costs as the Court considers just. This is subject to subsection (2A) and the applicable rules of Court.
Subsection (2A) of Section 117 reads as follows:
“117(2A) [Matters relevant to costs order] In considering what order (if any) should be made under sub-section (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, in accordance with section 117C or otherwise, 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.”
In Luadaka v Luadaka (1998) FLC 92-830, the Full Court of the Family Court of Australia said at paragraph 61:
“In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs. However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.”
In that case, the Full Court went on to say:
“The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other.”
The following quotations from Butler J’s decision in Brown and Brown; Eley and Henty (Interveners) (1991) FLC 92-265 (at p 78,778) are worth noting as a summary of some essential elements of the law in relating to security for costs:
“Costs security orders prevent abuse of Court process by inter alia preventing impecunious persons from litigating without responsibility.”
“Generally orders are made where the defendant is an unwilling participant in the litigation and should not be prejudiced by the plaintiff's lack of funds. But the Court must carefully balance this consideration against the possibility that the plaintiff might be shut out or unfairly dealt with if security is ordered.”
and
“It is of essential importance to consider as far as possible whether the plaintiff's shortage of funds has been brought about as a consequence of the defendant's conduct of which the plaintiff complains. If so it would be unfair to require the plaintiff to provide security for the defendant's costs.”
It is quite clear from the word “may” in Section 117(2) that there is a discretion in the Court to make orders in relation to costs, inclusive of orders for security for costs. Such a discretion in relation to security for costs was referred to by Lord Denning MR in Sir Lindsay Parkinson & Co. Ltd. V Triplan Ltd. (1973), QB 609 at 626. He said:
"Turning now to the words of the statute, the important word is 'may'. That gives the Judge a discretion whether to order security or not. There is no burden one way or the other. It is a discretion to be exercised in all the circumstances of the case. ''
It seems to me from the decisions referred to above, and in particular Laudaka, I need to consider the following:
a)Whether the Wife has the means to satisfy an order for costs if she is unsuccessful in her Section 79A Application;
b)The prospects of the success of her application;
c)The bona fides of that claim;
d)Whether the making of an order for security for costs would be oppressive or stifle the litigation;
e)Whether there has been any delay in the proceedings that causes prejudice to either party; and
f)The difficulty in enforcing any order for costs.
It is quite clear that the mere fact that a litigant is impecunious is not a basis for making an order for security for costs. However, it seems to me that in this particular case neither party is really impecunious. That is not to say that either party is well off. The Husband recently sold the former matrimonial home and, inter alia, he discharged or reduced a mortgage over another property that he owns with his current partner. In addition, I was informed that he would be going back to work shortly. This was the reason why he sought a modification of an undertaking to be given to this Court on 17 August 2001. (The Wife’s counsel was not challenged in any way when she put that to me.)
On the other hand, the Wife has purchased a block of land and has obtained a mortgage to build a house. Further, she is involved in litigation in which she rejected an offer of payment to her of $50,000.00. While I cannot possibly forecast the result of that litigation, I can only assume that she believes her claim to be worth more than $50,000.00.
The Wife states that she does not have the sum of $10,000.00 that the Husband is seeking be paid by way of security for costs. She states that she made an application for a loan for just that sum to complete the building of her home and that application was rejected. I have no way of knowing whether the application was rejected because she had inadequate security, inadequate income to repay the loan, a combination of both or for some other reason.
The Wife states that an order for security for costs would stifle the ongoing litigation and I am inclined to accept that as being correct.
I have no doubt about the bona fides of the Wife in making her claim. As I pointed out in my earlier decision of 9 July 2001, the Wife received only 23% of the assets of the marriage and her case is that she has been primarily responsible for maintaining the four children of the marriage. She must therefore have an arguable claim.
In relation to her prospects of success, counsel for the Husband made much of the fact that I had referred to her case as “a weak case” in my earlier decision. However, it is important to put those words in context. What I said was:
“While on the face of it, the documents currently before the Court may suggest a weak case on the part of the Wife, it is not unusual for an apparently weak case to become a strong case when the evidence is properly tested.”
In my earlier decision I also said that I could not be satisfied that her application was “doomed to fail”. It logically follows that she must have some chance of success. How good that chance is, will presumably be determined at some stage in the future.
Counsel for the Husband also made much of the fact that the Orders were made by consent in 1995 and the Wife did not make her Section 79A Application under 2001. In my earlier decision I pointed out that the Wife had to wait five years from the date of the Orders to ascertain whether the Husband would sell the former matrimonial home and thereby create a liability to the Wife of $50,000.00. That could go a long way to explaining the apparent delay on her part.
Not surprisingly, the Wife’s counsel saw some significance in the fact that the Husband had sold the former matrimonial home some months after the expiry of that five year period and, as a result, had avoided the liability to pay the Wife $50,000.00.
I have given very careful consideration to all the matters referred to above and I find that the Court should not exercise its discretion in favour of the Husband by ordering that there by any payment by way of security for costs. As a consequence, I order that the Husband’s Application for security for costs be dismissed.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Roberts FM
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