Magnus and Watkins and Anor

FEDERAL CIRCUIT COURT OF AUSTRALIA

MAGNUS & WATKINS & ANOR

[2018] FCCA 3703

Catchwords:
FAMILY LAW – Application for costs of enforcement proceedings –where there has been a comprehensive failure to comply with Court orders – where the second respondent has profited through such non-compliance – where there has been no attempt to negotiate a satisfactory resolution of the matter – where the applicant estate is modest and to be divided amongst five adult children – where the party seeking costs has been wholly successful in enforcement proceedings – fixed costs awarded.

Legislation:

Family Law Act 1975 (Cth) s.117

Applicant:

MR A MAGNUS AS JOINT EXECUTOR OF THE ESTATE OF MR B MAGNUS

First Respondent:

BANKRUPT ESTATE OF MS WATKINS

Second Respondent:

MR MANNING

File Number:

NCC 1183 of 2012

Judgment of:

Judge Betts

Hearing date:

10 December 2018

Date of Last Submission:

5 November 2018

Delivered at:

Newcastle

Delivered on:

10 December 2018

REPRESENTATION

Solicitors for the Applicant:

MRM Lawyers

Solicitors for the First Respondent:

Solicitors for the Second Respondent

Harris Carlson Lawyers

Self-represented

ORDERS

That the Second Respondent pay the Applicant’s costs of and incidental to the Application in a Case filed on 21 June 2018, fixed in the sum of four thousand, three hundred and twenty-four dollars ($4,324.00).

IT IS NOTED that publication of this judgment under the pseudonym Magnus & Watkins & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT NEWCASTLE

NCC 1183 of 2012

MR A MAGNUS AS JOINT EXECUTOR OF THE ESTATE OF
MR B MAGNUS (DECEASED)

Applicant

And

BANKRUPT ESTATE OF MS WATKINS

First Respondent

And

MR MANNING

Second Respondent

REASONS FOR JUDGMENT

Overview:

This is an application for costs which, by consent, is being determined in chambers.
The applicant for costs is Mr A Magnus (“the applicant”). He brings the proceedings in his capacity as joint executor of the estate of his late father, Mr B Magnus (“the late Mr B Magnus”).
The first respondent to the proceedings is Mr A Magnus’ sister, Ms Watkins (“Ms Watkins”). She is a bankrupt and her bankrupt estate is thus the relevant party. The second respondent to the proceedings is Mr Manning (“Mr Manning”). He is the former de facto partner of Ms Watkins.
By way of background, these are de facto property settlement proceedings originally commenced in 2012 between Ms Watkins and Mr Manning following the breakdown of their relationship.
One of the assets of their relationship the subject of the proceedings was a real property situated at Property A.
The late Mr B Magnus and his late wife were the parents of Ms Watkins. They lived in a self-contained residence at the Property A property which they had built and paid for with their own money ($125,000). They intervened in the property settlement proceedings because, on their case, they had invested the $125,000 in exchange for a right to occupy the self-contained residence for the rest of their lives.
On 20 June 2014 the property settlement proceedings were resolved by way of consent orders. Relevantly, Mr Manning was ordered to pay to the late Mr and Mrs Magnus the sum of $100,000 within 60 days of the orders. In default of payment, a trustee for sale was appointed to effect a sale of the Property A property, and the net proceeds of sale were to be applied to pay the $100,000 together with interest.
Mr Manning was also ordered to pay the sum of $50,000 to Ms Watkins, and in default of payment then such moneys were to be paid out of the sale proceeds of the Property A property in like manner.
It is common ground that those orders were never complied with. Mr and Mrs Magnus continued living at the property for a period, before moving away. They never pursued the payment of the $100,000 to which they were entitled pursuant to the orders. Nor for his part did Mr Manning sell the Property A property after the 60-day deadline for payment had expired. Ms Watkins also remained unpaid.
In January 2017, Ms Watkins went bankrupt.
In [date] 2017, the late Mrs Magnus passed away. The late Mr B Magnus passed away some 8 days later. The right to enforce payment of the $100,000 (plus interest) owing by Mr Manning to the late Mr B Magnus was a chose-in-action which vested in the estate.
The applicant, suing in a representative capacity on behalf of the estate, filed an Application in a Case on 21 June 2018. This essentially sought enforcement of the consent orders, together with costs.
On 3 September 2018 the parties entered into consent orders whereby the Property A property is now to be sold by way of a trustee for sale. The net sale proceeds will be applied to meet the payments which remain outstanding by Mr Manning pursuant to the June 2014 orders.
The only “live” issue remaining is the question of costs. On 3 September 2018, I ordered that any application for costs would be determined in chambers and I ordered that any such application be made within 28 days.
The applicant subsequently filed an Application in a Case on 2 October 2018 seeking his costs against the Second Respondent.

Material before me:

In determining this costs application, I have had regard to:
(a)the earlier orders to which I have referred;
(b)the Application in a Case and the applicant’s affidavit in support filed 21 June 2018 (seeking enforcement of the June 2014 orders and costs);
(c)the subsequent Application in a Case filed 2 October 2018 (seeking costs);
(d)the written costs submissions made by the applicant’s solicitor, Mr Stephen John Bray.
To complicate matters, the Application in a Case seeking costs was filed on 2 October 2018 - being the 29^th day after the making of the consent orders of 3 September 2018. On its face, it is out of time by 1 day.
However, I note that the 28^th day from the making of the orders was 1 October, being Labour Day in New South Wales, and so the 28 day time limit was extended to 2 October by operation of the Rules of Court.
In any event, I do not consider that the applicant was obliged to file a further Application in a Case on 2 October 2018. The original Application in a Case filed 21 June 2018 already sought a costs order. The consent orders of 3 September disposed of the substantive relief sought in that Application but the question of costs remained “live”. In my view, all that the applicant was required to do was to file an affidavit and written submissions in support of his costs application. There was no need to file a further Application in a Case and presumably it was done out of an abundance of caution.
Mr Manning has not filed any material in response. Apart from consenting to the orders for enforcement on 3 September 2018, he has played no active role in this latest iteration of the proceedings.

Section 117 of the Family Law Act:

I turn now to section 117 of the Family Law Act 1975 (Cth) and to the relevant considerations to which I must have regard in determining a costs application.
Pursuant to s.117(1), each party to family law proceedings bears his or her own costs, subject to subsection (2).
Section 117(2) provides that, if the court is of opinion that there are circumstances that “justify” it doing so, then it may make such order for costs as it considers “just”.
The relevant considerations for a court in deciding whether there are circumstances that “justify” the making of a costs order are set out in s.117(2A). I will now turn to those.
In relation to s.117(2A)(a), the estate of the late Mr B Magnus is modest with a gross property value of around $280,000. The estate is to be divided amongst 5 adult children.
I have no current evidence as to the financial circumstances of Mr Manning as he has chosen not to put any evidence before me.
I do note that Mr Manning was, for a time, living at the Property A property after the making of the orders of 20 June 2014. Since then it appears clear that the value of the property has increased over time, and its forced sale years after it should have been sold pursuant to the June 2014 orders will effectively net Mr Manning a modest “profit” given its increase in value.
Section 117(2A)(b) is not relevant.
Section 117(2A)(c) looms large. Mr Manning consented to the June 2014 orders - but insofar as these proceedings are concerned, he has not participated beyond consenting to the enforcement orders on 3 September 2018.
Mr Manning was invited by the applicant to try to resolve the matter prior to the enforcement application being filed on 21 June 2018. So much is clear from annexures “L”, “M” and “N” of the applicant’s affidavit filed 21 June 2018. In particular, on 7 July 2017 his solicitors wrote to Mr Manning confirming that the debt was outstanding pursuant to the orders of 20 June 2014; that the property at Property A had not been sold in accordance with the orders; and a demand for payment of the money was made within 14 days together with interest.
Mr Manning was invited to make that payment, failing which proceedings would be commenced in this Court, and he was requested to give the matter his urgent attention.
It would seem that Mr Manning did not give the matter his urgent attention. Beyond instructing a firm of lawyers (Wallbanks) – apparently quite briefly - there is no evidence that Mr Manning, in any meaningful way, responded to the demand for payment or that he in any way attempted to resolve the matter.
The solicitors for the applicant followed up with another letter of 21 July 2017 pointing out that the payment was well overdue, and that Mr Manning had the option of either paying the amount due together with interest, or selling the property and realising the amounts that were payable. The letter concluded:
Our clients, as executors of the estate of their late parents, feel that Mr Manning has had more than a sufficient time to bring this matter to conclusion. Unless a satisfactory response is received within seven days we are instructed to commence proceedings in the Family Court of Australia seeking an enforcement of the current orders.
I accept the submission made on behalf of the applicant that it was necessary to bring enforcement proceedings in circumstances where Mr Manning was not properly engaging. I also note that, due to Mr Manning’s non-compliance with the June 2014 orders, Ms Watkins’ bankruptcy trustee had filed a caveat over the Property A property so as to protect the interests of her unpaid creditors. The bankruptcy trustee required payment before the caveat could be released – so that on any view the matter needed to be brought to a head.
The consent orders of 3 September 2018 provided for the enforcement of the June 2014 orders, including payment of the amounts owing and removal of the caveat.
In relation to s.117(2A)(d), the fact of the matter is that Mr Manning comprehensively failed to comply with the orders of 20 June 2014. While he briefly engaged a solicitor to represent him when enforcement proceedings were threatened in 2017, he otherwise made no attempt to negotiate a satisfactory resolution of the matter. When enforcement proceedings were commenced, Mr Manning promptly capitulated.
That said, it is also clear that Mr and Mrs Magnus did not take any active steps to enforce the June 2014 orders during their lifetime. They did not in their lifetime pursue the fruits of the litigation.
In relation to s.117(2A)(e), I consider that Mr Manning has been wholly unsuccessful in these enforcement proceedings.
In relation to s.117(2A)(f), there are no settlement offers before me but certainly the applicant attempted to instigate settlement discussions with Mr Manning in 2017.
In relation to s.117(2A)(g), the late Mr and Mrs Magnus passed away without ever receiving the benefit of the monies to which they were entitled under the June 2014 orders. Further, Mr Manning had the enjoyment of the real property for a period after the moneys were due and payable and he received some rental income from the property. The property has also gone up in value over time. Thus Mr Manning has ended up “profiting” through his own non-compliance with the June 2014 orders.
In conclusion, I consider that the circumstances justify me making a costs order in favour of the applicant against Mr Manning in respect of the enforcement proceedings. I give particular weight to the matters arising pursuant to s.117(2A)(c), (d) and (e) as discussed earlier.
In terms of the quantum of any costs order, the applicant seeks costs on a party and party basis in accordance with the Federal Circuit Court Scale in the amount of $5,547.30. But in arriving at that figure, the applicant has added GST. No such addition is permissible; the Scale itself makes clear that the figures therein are inclusive of GST.
In my view, the appropriate party and party costs recoverable on the Scale are:
(a)Item 1(a) in the amount of $2,162.00
(b)Item 13 in the amount of $2,162.00;
being a total of $4,324.00.
The court considers it “just” that the Second Respondent pay the applicant’s costs in this amount and the court will make orders accordingly.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Betts.

Date: 12 December 2018

[2018] FCCA 3703

10 December 2018

Key Legal Topics

Areas of Law

Civil Procedure

Legal Concepts

Costs