Manfredi & Lando

Case [2022] FedCFamC1F 129

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Manfredi & Lando [2022] FedCFamC1F 129   

File number(s): MLC 14099 of 2020
Judgment of: HARTNETT J
Date of judgment: 10 March 2022
Catchwords: FAMILY LAW – COSTS – Application by the Respondent for costs – circumstances going to the making of a costs order – where the Applicant filed a Notice of Discontinuance of her Amended Initiating Application – where the Respondent sought costs on an indemnity basis or alternatively a lawyer/client or party/party basis – where the Applicant opposes an order for costs – where there should be an order that the Applicant pay the Respondent’s costs on a party/party basis.
Legislation:

Family Law Act 1975 (Cth), ss. 117(1), 117(2), 117(2A)

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth),Sch. 3.  
Cases cited:

Collins and Collins (1985) FLC 91-603

Lenova v Lenova (Costs) (2011) FLC93-467

Mallet v Mallet (1984) FLC 91-507

Norton v Locke (2013) FLC 93-567; [2013] FamCAFC 202

Penfold v Penfold (1980) 144 CLR 311; (1980) FLC 98-800

Tailor & Tailor [2019] FamCA 383

Trevi & Trevi [2015] FamCA 123

Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 92-029

Division: Division 1 First Instance
Number of paragraphs: 43
Date of last submissions: 18 August 2021
Date of hearing: On the papers in chambers
Place: Melbourne
Counsel for the Applicant: Ms Swart
Solicitor for the Applicant: Coulter Roche Lawyers Pty Ltd
Senior Counsel for the Respondent: Ms Stoikovska
Solicitor for the Respondent: Kennedy Partners

ORDERS

MLC 14099 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS MANFREDI

Applicant
AND:

MR LANDO

Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

10 MARCH 2022

THE COURT ORDERS:

1.That the Applicant pay the costs of the Respondent on a party/party basis in accordance with Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) to be taxed in the event there is no agreement between the parties.

2.All outstanding applications are removed from the pending cases list.

Note:   The form of the order is subject to the entry in the court’s records.

Note: This copy of the court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

REASONS FOR JUDGMENT

HARTNETT J:

PRELIMINARY

  1. This is an application for costs by the Respondent, Mr…

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AGLC
Manfredi & Lando [2022] FedCFamC1F 129
Case
[2022] FedCFamC1F 129
Decision Date

CaseChat Overview and Summary

In Manfredi & Lando, the parties were involved in a complex dispute concerning property and financial claims following a de facto relationship. The Applicant filed proceedings against the Respondent, asserting an interest in properties owned by the Respondent, including B Street, based on an implied, resulting, or constructive trust. The Respondent sought repayment of loans, possession of B Street, and equitable relief against the Applicant’s property at J Street. The Applicant lodged caveats against several of the Respondent’s properties, which were subsequently withdrawn except for B Street. The Respondent applied for summary dismissal of the proceedings and sought financial disclosure from the Applicant. The court was tasked with determining the appropriate costs order between the parties under section 117 of the Family Law Act 1975 (Cth).

The key legal issues revolved around the appropriate basis for awarding costs between the parties. The Applicant argued that the Respondent’s conduct in relation to the caveats led to the majority of early costs, while the Respondent claimed that the costs were incurred in defending the Applicant’s application for a declaration of a de facto relationship. The court had to consider whether the Applicant's financial circumstances justified a costs order against her and whether the Respondent’s financial difficulties should preclude such an order. The court also had to assess whether the misconduct of the Applicant was of an exceptional kind to justify an indemnity costs order.

The court concluded that an indemnity costs order was not appropriate, but a party/party costs order was justified. The Applicant's financial position, although not robust, did not preclude the making of a costs order in the Respondent's favour. The court held that the Applicant's misconduct was not sufficiently grievous to warrant indemnity costs, but her actions warranted a costs order under section 117(2A) of the Family Law Act 1975 (Cth). The financial circumstances of both parties were taken into account, with the court determining that the Respondent’s severe financial difficulties did not override the need for the Applicant to contribute to the Respondent’s legal costs.

In conclusion, the court ordered that the Applicant pay the Respondent’s costs on a party/party basis, taking into account the financial positions and the nature of the proceedings. The court did not find the Applicant's misconduct to be of an exceptional nature that would warrant indemnity costs, and therefore, the order for party/party costs was deemed appropriate under the circumstances.

Orders

Orders of the court

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Background

Background to the litigation

The Respondent submits that the Applicant had no prospect of success from commencement of the proceeding. The Respondent seeks that the Applicant should pay costs either on an indemnity basis, or alternatively on the lawyer-client basis, or alternatively on scale as specified in accordance with Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”). BACKGROUND The proceedings were initiated by the Applicant on 18 December 2020. The Respondent contends that the Applicant filed a proceeding in the court in response to receiving a letter of demand, three weeks prior to 18 December 2020, from his commercial solicitors which sought vacant possession of B Street; and the repayment of loans made by the Respondent to the Applicant which totalled $715,000. The Applicant in effect agrees with this contention.[1][1] Applicant’s Written Submissions file 5 August 2021 at paragraph 3. On or about 11 to 13 January 2021, the Applicant lodged caveats against several properties owned by the Respondent , including B Street and properties owned by the Respondent and acquired by him prior to the commencement of the alleged de facto relationship (“the caveats”). The caveats claimed an interest in the said properties pursuant to an implied, resulting or constructive trust. No such asserted interests in properties owned by the Respondent, other than B Street, were pleaded or otherwise referred to in the Initiating Application. On 22 January 2021, the Respondent ’s commercial and family solicitors sent a letter to the Applicant requesting the removal of the caveats, particularly as contracts of sale had been signed with respect to the properties situate at E Street Suburb F in the State of Victoria (“E Street”) and G Street, Suburb H (“G Street”).[2] The Applicant, by letter dated 28 January 2021, agreed to remove the caveats registered against E Street and G Street provided the net proceeds of sale were held in her lawyer’s trust account.[3] The Applicant did not agree to withdraw the caveat lodged against B Street.[4][2] Annexure “H-8” of the Respondent’s trial affidavit filed 9 June 2021. [3] Annexure “H-10” of the Respondent’s trial affidavit filed 9 June 2021.[4] Ibid. On 15 February 2021, the Respondent issued a Writ in the Supreme Court of Victoria where he sought repayment of “alleged” loans; possession of B Street; and equitable relief against the Applicant’s property situate at and known as J Street, Suburb K in the State of Victoria (“J Street”). On 18 February 2021, the Respondent filed a Response to Initiating Application and Application in a Case which sought, inter alia: summary dismissal of the Initiating Application; to be excused from filing a Financial Statement or financial disclosure; urgent removal of caveats; and the Applicant’s financial disclosure. On 2 March 2021, at a case assessment conference before a Registrar, the Applicant agreed to remove the caveats in their totality. The Respondent pressed his application for the Applicant’s financial disclosure. An order was made for the Applicant to file an affidavit of evidence in support of her declaration that the parties were in a de facto relationship to assist the court in its consideration of the then adequacy of the Applicant’s financial disclosure as contained in her Financial Statement filed 18 December 2020. The Applicant filed an affidavit on 6 April 2021, being not an affidavit of evidence in chief as ordered but nonetheless, relied upon by her as her evidence.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

Not relevant. CONCLUSION I am of the view that an award of indemnity costs would not be appropriate in these circumstances, as was conceded by the Applicant. Any justifying of an award of indemnity costs needs to be of an exceptional kind.[28]. The misconduct of the Applicant is not so grievous as to justify the Respondent’s costs orders as sought save those of party/party costs. In my assessment, the circumstances set out justify an order for such costs. [28] Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 92-029 at 87, 471. I am satisfied that in all of the circumstances that this is a matter where the provisions of s. 117(1) wherein each party is to pay their own legal costs is not appropriate. I am satisfied that having regard to the provisions of s. 117(2A) and in the exercise my discretion that this is a matter where a costs order ought to be made.

Ratio Decidendi

Legal Principle Established

In Penfold v Penfold, the High Court (Stephen, Mason, Aickin and Wilson JJ) held that:12.It is an accurate description of s. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s.117(2). As subsec (1) is expressed to be subject to subsec (2) the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.13.Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently …... we do not agree with the suggestion….... that an order can only be made under s.117(2) in a 'clear case'.CONSIDERATION Turning to the considerations under section 117(2A) of the Act by reference to the particular facts in this matter: (a) The financial circumstances of each of the parties The Applicant is in receipt of rental income in the sum of $328 per week.[5] She is also in receipt of a disability pension. The Applicant is the sole registered proprietor of unencumbered real property situate at J Street, Suburb K with an estimated value of $780,000. She had cash savings of about $70,000 on the evidence but I note her written submissions claim these funds to have been diminished.[6] The Applicant claimed that her financial circumstances have also deteriorated since she filed her Financial Statement in December 2020 due to litigation costs in the Family Court and the Supreme Court.[7] [5] Applicant’s Financial Statement filed 18 December 2020. [6] Ibid. [7] Applicant’s Written Submissions filed 5 August 2021 at paragraph 12. The Respondent was not required to file a Financial Statement. His evidence was that he fell into “severe financial difficulty” and has suffered “financial distress” because of his relationship with the Applicant.[8] He also deposed to own multiple properties. [8] Respondent’s trial affidavit filed 9 June 2021, at paragraphs 120 and 141. The Respondent contended that even if the Applicant did not have, or had limited, financial capacity to meet an order for costs, that should not preclude the making of a costs order in his favour as stated by the Full Court in Lenova v Lenova (Costs) (2011) FLC93-467 at [12]:…….a limited financial capacity to meet an order [for costs] cannot 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. The Applicant submits that a significant portion of the costs claimed deal with the issue of the removal of caveats. She claims that the Respondent’s conduct in attempting to seek orders in relation to caveats led to him incurring the bulk of the early costs in this matter.[9] The Respondent contends that the costs as claimed by him in their totality were incurred in defence of an application for a declaration that a de facto relationship existed. [9] Applicant’s Written Submissions filed 5 August 2021 at paragraph 19.