Manfredi & Lando
[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
This is an application for costs by the Respondent, Mr Lando (“the Respondent”).
The Respondent seeks that the Applicant, Ms Manfredi (“the Applicant”) pay his costs of and incidental to proceedings initiated by the Applicant on 18 December 2020 and proceeded with by way of an Amended Initiating Application filed on 6 April 2021. The Applicant sought a declaration pursuant to s. 90RD of Family Law Act 1975 (Cth) (“the Act”) that the Applicant and Respondent were in a de facto relationship and in the event such declaration was made by the court, orders in relation to property settlement and periodic maintenance including the transfer to the Applicant of the real property situate at B Street, Suburb C in the State of Victoria, which was owned by the Respondent (through D Pty Ltd as trustee for the D Trust) (“B Street”).
The Respondent filed a Response on 17 February 2021, and Amended Response on 23 February 2021. In both documents he sought dismissal of the Application and a costs order in his favour.
On 8 July 2021, the court made orders that:
(1)The Applicant have leave to discontinue her amended initiating application filed on 6 April 2021.
(2)The Respondent file and serve any written submissions as to costs within 14 days hereof.
(3)The Applicant file and serve any submissions as to any costs application of the Respondent within 28 days hereof.
(4)The Respondent file and serve any written submission in reply within 14 days after receipt of any submissions filed by the Applicant pursuant to order 3 herein.
On 9 July 2021, the Applicant filed a Notice of Discontinuance.
The Respondent filed Written Submissions and an affidavit sworn or affirmed by his solicitor, Ms M, on 22 July 2021. The Applicant filed her submissions in reply on 5 August 2021. The Respondent filed a reply to the Applicant’s submissions on 18 August 2021. Unfortunately, an administration error then occurred which has delayed the delivery of these reasons for judgment. For that I apologise to the parties. I have only recently considered these documents which are relied upon by the parties.
The general rule in family law proceedings is that each party bear their own costs (s 117(1) of the Act. However, if after consideration of the matters set out in s 117(2A) of the Act, the court forms the view that the circumstances justify an order for costs, the court may make such costs order as it deems to be just.
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.
On 14 April 2021, trial directions were made and the matter listed for hearing on 6 July 2021 in respect of the threshold issue of jurisdiction. On 6 July 2021, the hearing commenced.
On 8 July 2021, at approximately 4.15pm and before the Applicant’s case had closed, the Applicant gave to the court and the Respondent notice of her intention to discontinue her Initiating Application. On 9 July 2021, the Applicant filed a Notice of Discontinuance.
The Respondent’s legal costs and disbursements are subject to a costs agreement dated 28 October 2020. His lawyer/client costs as claimed equalled the sum of $188,291.93 and as claimed party/party costs equalled the sum of $104,249.67.
The Respondent points to the conduct of the Applicant commencing the proceeding by her Application, particularly in light of her admission in cross-examination that she did not consider herself to be in a de facto relationship until she sought legal advice, and the Applicant’s continuance of the proceeding, in circumstances where, as submitted by the Respondent, it must have been plainly obvious to the Applicant that her claims had no prospect of success. It was further submitted by the Respondent, that the Applicant filing a Notice of Discontinuance, three days into the trial, conceding her claim should not proceed, was a highly relevant factor to be considered in the Respondent’s application for costs. Accordingly, the Respondent submitted there was justification for departure from the usual rule.
THE LAW
Section 117(1) of the Act provides for each party to pay their own costs. Section 117(2) provides that the court can make an order for costs, in the exercise of its discretion, and when considering whether to do so, the court is required to consider certain matters set out in s. 117 (2A) together with any other relevant matter.
In Collins and Collins (1985) FLC 91-603 at page 79, 877, the Full Court of the Family Court (Evatt CJ, Pawley & Barblett JJ) said:
In deciding whether the circumstances justify an order for costs, there is a broad discretion to be exercised, having regard to the factors set out in subs. (2A) so far as relevant. Those factors…. are not to be read in a restrictive way, however, the discretion remaining is a broad one: Penfold v Penfold (1980) FLC 90-800 at pp 75,053-75,054 (High Court); quoted in Mallet v Mallet (1984) FLC 91-507 at pp 79,123-79, 124 (by Wilson J).
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.
There was no evidence before the court to support the Applicant’s submission that her financial circumstances had deteriorated which included a further submission made by the Applicant that she owes, or will owe, monies to the Commonwealth.[10] In any event, even if this were a factor, the Respondent submits that the Applicant should not be permitted to rely on her own dereliction in failing to disclose income to the Australian Taxation Office and Centrelink in support of any such submission regarding her financial circumstances.[11] I agree with that submission of the Respondent. The Applicant conceded in cross-examination that she had over $100,000 in her bank accounts in January 2020 being the time at which she was requesting of the Respondent an upgrade to her holiday accommodation in Queensland (which the Respondent was financing).[12] The Applicant’s contention that her finances have been impacted by the costs of Supreme Court proceedings is irrelevant to the Respondent’s application for costs in this court proceeding. I find the Applicant has sufficient financial capacity to meet a costs order and further that her capacity, in any event, is not determinative of the outcome in this matter.
[10] Ibid at paragraph 12.
[11] Respondent’s Written Submissions in Reply filed 18 August 2021 at paragraph 12.
[12] Ibid.
(b) Whether either party is in receipt of Legal Aid
Neither party was eligible for or in receipt of Legal Aid.
(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, direction to answer questions, admissions of facts, production of documents and similar matters
The Respondent submits that the Applicant had an “ulterior motive” in filing her Initiating Application in the court to subvert the foreshadowed Supreme Court proceedings which were subsequently initiated by the Respondent.[13] The Respondent submits further that the Applicant’s conduct in initiating proceedings and discontinuing them on day three of the final hearing is wholly relevant to the question of costs.[14]
[13] Respondent’s Written Submissions filed 22 July 2021 at paragraph 22.
[14] Ibid.
The Applicant claims that the parties were in a romantic sexual relationship across many years. The Respondent in part supported the Applicant financially by providing her with a home, paying various of her expenses, and paying an amount to her ex-husband. The Respondent paid some rent for the Applicant’s daughter to study in Sydney and funded some holidays for the Applicant and her children. The Applicant claimed that there was a “real and justiciable” issue whether the relationship met the definition of de facto under s 4AA of the Act.[15] She submits there was no “ulterior motive”, no improper purpose and that she properly brought her case seeking a declaration of a de facto relationship.[16]
[15] Applicant’s Written Submissions filed 5 August 2021 at paragraph 29.
[16] Ibid at paragraph 30.
It is contended by the Respondent that he should not have been put to the expense of defending the Applicant’s Initiating Application with respect to the jurisdictional threshold issue.[17] The Respondent contends that the Notice of Discontinuance filed was a concession from the Applicant that her claim had no real prospect of success given the following facts, not challenged:
(a)There were no children of the alleged de facto relationship;
(b)The parties did not share a common residence at any time;
(c)The alleged de facto relationship was clandestine whereby the parties’ immediate family and friends were not aware of it, most notably, the Applicant’s children who lived with her, were not made aware of the relationship;
(d)The Applicant did not disclose the alleged de facto relationship to statutory authorities including Services Australia (“Centrelink”); the then Federal Circuit Court of Australia (now the Federal Circuit and Family Court of Australia) and her counsellor and general medical practitioner;
(e)The duration of the alleged de facto relationship, of approximately four to five years on the Applicant’s case, which included four to five months when she was living with her estranged husband and included a temporary separation of six months;
(f)The parties held no joint bank accounts nor intermingled their finances. The Applicant made no meaningful financial contribution toward the acquisition, improvement or preservation of the Respondent ’s property; and
(g)The text message evidence between the parties, showed that the Applicant knew that B Street was owned by the Respondent (she had at one point offered to pay rent and/or vacate the property). However, she sought to transfer B Street to her and swore an affidavit which alleged that B Street was purchased for her and/or her children.
[17] Ibid.
The court accepts that the Applicant’s case had no real prospect of success, and observes that the proceeding continued for 3 days before the Applicant filed her Notice of Discontinuance. Unnecessary costs were incurred by the Respondent.
(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The Respondent claims that the Applicant failed to diligently prosecute her claim.
On 14 April 2021, the court made trial directions that included that the Applicant make full and frank disclosure by producing financial documents including bank statements and that she file affidavits of evidence in chief.[18]
[18] Order made 14 April 2021.
The Applicant partly complied with the order to make financial disclosure. The Applicant did not produce statements from all her bank accounts (including loans); her income tax return for the financial year ended 30 June 2015; or her applications to Services Australia for a means-tested government pension.[19] The Respondent was required to issue subpoenas to Australia New Zealand Banking Group (“ANZ”), Commonwealth Bank, Westpac and L Bank to obtain all of the Applicant’s account statements. This represented unnecessary costs being expended by the Respondent.
[19] Annexure “H-3” of the Respondent’s trial affidavit filed 9 June 2021.
Otherwise, the complaints made by the Respondent are not of such significance to establish a finding that there was a failure by the Applicant to diligently prosecute her claim.
(e) Whether any parties to the proceedings has been wholly unsuccessful in the proceedings
The Applicant claimed that she was faced with an increasingly expensive, lengthy threshold trial and in the context of Supreme Court proceedings on foot with overlapping issues, it was to the parties’ benefit that she discontinue the proceedings.[20] The Applicant concedes in her own submissions however, that put forward by the Respondent, namely that the case had “limited prospects of success.”[21] Indeed, the Respondent argues it had no real prospect of success. Given the Applicant discontinued her application without completing the trial, before the conclusion of her cross-examination, and before the Respondent was cross-examined, it is evident, as submitted by the Respondent that her contention that there was a “real and justiciable issue” as to whether a de facto relationship existed, cannot be sustained. The Respondent’s central contention is that the Initiating Application should not have been issued at all.[22] It should have been obvious to the Applicant from the outset that the Supreme Court proceedings were “on overlapping issues” when she filed proceedings in the Family Court.[23] This is a matter with which I agree and is one of significance which I take into account.
[20] Applicant’s Written Submissions filed 5 August 2021, at paragraph 24.
[21] Ibid at paragraph 18.
[22] Respondent’s Written Submissions in Reply filed 18 August 2021 at paragraph 7.
[23] Applicant’s Written Submissions filed 5 August 2021, at paragraph 24.
The Respondent’s application to remove the caveats was not misconceived or “doomed to fail for want of jurisdiction”[24] as asserted by the Applicant. The court has inherent and legislative power to make orders to “preserve the status quo” pending the determination of the threshold issue of jurisdiction.[25] The Applicant removed the caveats of her own volition on or about 2 March 2021, a concession by her, that there was no proper basis for lodging the caveats.[26] Her claim against the Respondent in the proceeding was an application for the alteration of property interests pursuant to s. 90SM of the Act, and such a claim is not a caveatable interest.[27] The Applicant was made aware of this by letter dated 22 January 2021 from the Respondent’s commercial and family law solicitors, prior to the Respondent filing his Application in a Case to remove the caveats on 17 February 2021.
(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
[24] Ibid at paragraph 30.
[25] Norton v Locke (2013) FLC 93-57; [2013] FamCAFC 202.
[26] Respondent’s Written Submissions in Reply filed 18 August 2021 at paragraph 3.
[27]Trevi & Trevi [2015] FamCA 123; Tailor & Tailor [2019] FamCA 383.
Not a relevant factor in this matter.
(g) Such other matters as the court considers relevant
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.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hartnett. Associate:
Dated: 10 March 2022
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