Martoulis & Valas (No 2)
[2023] FedCFamC2F 365
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Martoulis & Valas (No 2) [2023] FedCFamC2F 365
File number(s): MLC 11009 of 2020 Judgment of: JUDGE O'SHANNESSY Date of judgment: 10 March 2023 Catchwords: FAMILY LAW – costs application – where applicant did not satisfy burden of proof of reconciliation of matrimonial relationship after final orders made – much evidence inconsistent with each parties case – no offers made in writing – where no orders made as to costs. Legislation: Federal Circuit and Family Court of Australia Rules 2021, r 12.13
Family Law Act 1975 (Cth), 4AA, 79, 90RD, 117
Cases cited: Calderbank v Calderbank [1975] 3 All ER 333
Hall v Hall [2016] HCA 23; 257 CLR 490; (2016) FLC ¶93–709; 54 Fam LR 631
Jones v Dunkel [1959] HCA 8
Martoulis & Valas [2022] FedCFamC2F 178
Division: Division 2 Family Law Number of paragraphs: 33 Date of hearing: 10 March 2023 Place: Melbourne Counsel for the Applicant: Mr D. Kaufman Solicitor for the Applicant: Sterling Walters Lawyers Counsel for the Respondent: Mr L. Fudim Solicitor for the Respondent: Josephdavid Lawyers ORDERS
MLC 11009 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR MARTOULIS
Applicant
AND: MS VALAS
Respondent
order made by:
JUDGE O'SHANNESSY
DATE OF ORDER:
10 MARCH 2023
THE COURT ORDERS THAT:
1.The Applicant’s Application in a Proceeding filed 23 January 2023 be dismissed.
2.There be no order as to costs.
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 a pseudonym Martoulis & Valas (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
These are the settled reasons of an oral judgment delivered ex tempore. These settled reasons have been corrected from the transcript to correct grammatical errors, to add citations and to attempt to make the orally delivered reasons easier to read. The substance is unchanged.
BACKGROUND
Ms Valas (‘the Wife’), who was the Respondent during the previous proceedings, filed an Application in a Proceeding on 23 January 2023 seeking a costs order against Mr Martoulis (‘the Husband). The Wife seeks that I make an order for costs following section 90RD of the Family Law Act 1975 (Cth) (‘the Act’) proceedings that were heard over 6 and 7 May 2021 and 12 and 13 July 2021. In those proceedings, the Husband's application for a declaration that there was a de facto relationship and/or alternatively a proper basis to bring section 79 of the Act proceedings and set aside a previous section 79 order was dismissed.
My decision was handed down on 23 December 2022, anonymised as Martoulis & Valas [2022] FedCFamC2F 1781 (‘the first judgment’). This judgment should be read together with the first judgment.
At the commencement of the hearing before me, I brought to the parties attention a slip or error at paragraph 233 of my reasons of 304 paragraphs, to the effect that the first sentence at paragraph 233 should be deleted and is entirely inconsistent with the paragraphs before it and following.
The Wife’s Application in a Case relies upon the provisions of section 117 of the Act, which are:
117 Costs
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(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), (5) and (6) 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.
(Notations omitted)
There is no question that the Wife’s application for costs was brought within the time limit pursuant to rule 12.13(2) of the Federal Circuit and Family Court of Australia Rules 2021 (‘the Rules’).
The Wife sought party/party costs on scale that totalled about $32,000. There was no issue with the quantum of costs sought as being appropriate within the order of the scale. Of course the Wife’s actual costs exceed that by a significant amount and are in the order of more than $50,000. The Husband’s costs are of a similar dimension.
In discussion with counsel for both parties I raised the issue that from my perspective, given the circumstances of the case covered literally hundreds, if not thousands of events, from 2007 until 2020, for the parties’ lawyers to be able to compress those events into a four-day hearing spoke significantly of their expertise and efficiency, and I want to acknowledge that in these proceedings.
The Wife's case, with efficiency and some powerful persuasion by Mr Kaufman of counsel, summarised the law as saying that no provision of section 117 of the Act has primacy and should be regarded as more important than the others. There was no dispute or controversy about that.
The Wife's case was that from before the commencement of the proceedings the Husband had known the Wife's position, as set out in the letter of 1 September 2020 and marked as exhibit W1 of 10 March 2023. In October 2020, following that letter, the Husband commenced the proceedings.
Mr Kaufman makes the point that the Husband engaged in the proceedings on the basis of a knowledge that significant costs would be incurred and would be sought if he were unsuccessful.
It is common ground that section 117(2A)(b) (legal aid) and section 117(2A)(d) (noncompliance) are not relevant in this case.
It is also common ground that there were no Calderbank offers (Calderbank v Calderbank [1975] 3 All ER 333) made by either party, or offers in writing in the proceedings. That fact that there were no offers is significant to me.
It is also significant that the letter of 1 September 2020 at paragraph 9 set out in some detail the position of there being financial separateness, or a lack of a joining together of the parties finances, during the period of residence in the same house. It needs to be noted that it was common ground that from 2012 to 2020 the Husband had lived in the same dwelling as the Wife and their two children. Ultimately, as set out in the first decision, I found that the parties had maintained a financial separateness throughout the period of dwelling together in the same house. The issue in the proceedings was whether that dwelling in the same house amounted to a reconciliation of the marital relationship or a de facto relationship.
The Wife relied upon section 117(2A)(c), the conduct of the parties to the litigation. I refer to the following paragraphs of the first judgment:
[85]The Wife says the Husband’s claim that he brought into the ‘reconciled’ relationship in mid-2007 $60,000 from the property settlement he had received in 2006 was simply not correct and the reality was far from what was asserted … The point the Husband tried to make by the $60,000 assertion was an important one.
…
[89]I am satisfied from those contemporary materials and those objectively established facts as well as the Husband’s demeanour and evidence when cross-examined on this point, that the Husband did not “contribute $60,000 of his $70,000 ‘payout’” or any other significant amount “back into the family finances”. That the Husband made such an assertion goes to the reliability of his evidence and his case.
…
It was argued that the Husband pursued the case in spite of that objective evidence.
It was acknowledged when addressing 117(2A)(a) of the Act that the Husband was of modest income and assets and indeed the modesty of his assets and income was described by Mr Kaufman as impecuniosity. I found that the Husband is not impecunious in the strict sense of that word, but in limited and straitened financial circumstances. He is in full time employment with a gross before tax income of about $58,000 per year. He rents modest accommodation. He owns a modest motor car. And he has the modest sum of $50,000 in superannuation. He is not impecunious, but he is in straitened or very limited financial circumstances. He has a total of a tad over $3,000 in the bank to meet the rainy day or lumpy or unusual expenses. He can only get by week to week by careful conservation of his income and careful budgeting: but he does so.
The point that the Wife's counsel made was that even impecuniosity is not a bar to an order for costs and I regard that as settled law. The issue of financial assistance from the Husband's parents and sister was raised and it was said that they might assist him with an order for costs. And that I should draw the inference, because of the well-known authority of Jones v Dunkel [1959] HCA 8 that not having put that evidence on affidavit as to whether or not they would, I should draw the inference that that would not assist the Husband's case.
The fact that the Husband could ask his sister and his parents to help him meet an order for costs is of marginal relevance. The fact that he might be able to depend upon the generosity of a friend or relative would not amount to a financial resource. I refer to the following paragraph of Hall v Hall [2016] HCA 23; 257 CLR 490; (2016) FLC ¶93–709; 54 Fam LR 631 with respect to a financial resource:
[54]The reference to “financial resources” in the context of s 75(2)(b) has long been correctly interpreted by the Family Court to refer to “a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency”. The requirement that the financial resource be that “of” a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee’s discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
I place little weight on that aspect. The point that the Wife's counsel made was that impecuniosity or straitened financial circumstances cannot be an indemnity against the incurring of costs on the other side.
The point was made that in terms of opposing a declaration, the Wife has been wholly successful. It was further put that not only was she wholly successful but I should regard the proceedings as more akin to civil proceedings than the run of the mill or common or garden family law proceedings where jurisdiction is not an issue and the proceedings proceed on the basis of each party gaining further information, such as single expert valuations and so on. The difference between a proceeding where jurisdiction is admitted and the proceedings are necessary to divide the property of parties who have been in an intimate relationship compared to a section 90RD proceedings is a valid point. However, I am not satisfied that it goes as far as to say that they are more akin to civil proceedings than Family Law Act proceedings.
The Wife's counsel makes the point that, the efficiency of the lawyers involved notwithstanding, this was always going to be an expensive process and the Husband knew it when he embarked on the proceedings. Comparing the Husband's income of $58,000, the Wife has a significantly greater income of, in full-time employment, $104,000. The disparity between their incomes would of course be significantly less when marginal rates of income tax are taken into account. The Wife's household supports two adult children in addition to herself. However, the Wife's financial circumstances are such that she owns a modest car, has a buffer, or cushion of money in the bank for lumpy or unexpected expenses, of only $6,000. But she has something in the order of at least three-quarters of a million dollars in equity in the home that she purchased. Relative to many in the community, the Wife's mortgage of about $53,000 is modest. The Wife has superannuation of $190,000. The Wife's financial circumstances are very significantly superior to the Husband's.
Mr Fudim, for the Husband, points to the disparate financial position between the parties. And whilst acknowledging and conceding that the Husband was unsuccessful in his application, and the Wife was entirely successful, in the conduct of the case, he points to many aspects of the case whereby the Wife's evidence was not accepted and aspects of the evidence were inconsistent with the Wife's case, or found to be inconsistent with the Wife's case, and in some instances entirely inconsistent. He pointed to a number of what were described in the reasons as events shown in photographs in evidence, including events 7 and 8. I recite the following paragraphs of the first judgment:
[167]Although of only the Husband and the Wife, photo 18 shows the parties looking at each other while the Wife has her arm touching the Husband’s waist and he has his arm around and resting on her shoulder. Photo 19 is of only the Husband and the Wife and they are pressed together with the Husband’s arm around and resting on the Wife’s shoulder.
…
[169]The Wife’s evidence is that the Husband moved into her home as a boarder (and alternate weekends ceased) in 2012. Hence, this cannot be a “changeover.” I do not accept the Wife’s evidence on this point.
[170]At this moment in time the photo does show two parents with an apparent closeness and affection for each other and the parties do “look happy and affectionate” …
[171]At that moment in time the family were at an event together and the parents do look, to any observer, happy and affectionate or look to have a closeness and affection for each other. What lies behind that “look” or apparent closeness and affection is another matter. It is possible that, if asked for a photo by her daughter, the Wife would attempt to look happy and even affectionate just for the photo. The Wife is an intelligent person and I am satisfied she understood the difference between the objective “look” or appearance of the photo and whether or not she was happy and affectionate at that moment. The Wife’s flat and repeated denial of the obvious appearance of the photo goes to the reliability of her evidence.
…
[176]The error to assert that her father had died in 2012 as part of the deflection of the significance of the photo reduces my confidence in the reliability of the Wife’s evidence. The “Christmas” or “New Year’ events of the -4 photo and photo 20 are inconsistent with the Wife’s evidence of [82].
Ultimately I determined that of the 21 events shown in the photographs (putting aside those events that were neither inconsistent with either parties’ case and supported each parties’ case). But it is significant that of those 20 events 2 of them were inconsistent with the Wife's case and supported the Husband's case. I recite the following paragraph of the first judgment:
[209]I do not accept that the events and photos described above are merely special occasions that the Husband was invited to as the father of the children, or as an active father invited to events. The Wife’s case was otherwise that he was not an “active father”. 20 of these 21 events are consistent with the Husband’s case and inconsistent with the Wife’s case and evidence. This is particularly when taken and looked at together over 10 years.
Mr Fudim makes the point that the Husband's case, though ultimately unsuccessful, was not hopeless, was not frivolous, and was not vexatious. I place no weight on the circumstance that the matter was not vexatious as that is in a different category and vexatious means conducting proceedings in a wholly inappropriate manner. And the fact that you do not do something that is not entirely inappropriate should not advance your case or a costs application.
Nonetheless there is substance in Mr Fudim's point that on many, and not a few evidentiary points, the Husband's position was successful. And as he asserted, I accept that the case was one that required close analysis of both the law and the facts. He points to the circumstance that this was a threshold hearing and with the inevitable saving to both parties of expense had it been a full hearing. Mr Fudim points that the Husband was only unsuccessful at the last hurdle because of the burden of proof having tripped him up. And there is substance in that. Mr Fudim says that this is an ideal case that rests comfortably with the primary or starting position of section 117: of each party bearing their own costs.
Mr Fudim correctly asserts that I must form the opinion, having assessed all of the matters under section 117, that this is an appropriate case for an order for costs. I find that notwithstanding that the Husband was entirely unsuccessful, in obtaining the orders he sought, there was a proper basis to bring the case.
For the purpose of dealing with the wide variety of modern relationships, Parliament has determined that section 4AA of the Act intended to cover a wide variety of relationships. I recite it as follows:
De facto relationships
Meaning of de facto relationship
(1) A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b) the persons are not related by family (see subsection (6)); and
(c)having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
Paragraph (c) has effect subject to subsection (5).
Working out if persons have a relationship as a couple
(2) Those circumstances may include any or all of the following:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children;
(i) the reputation and public aspects of the relationship.
(3)No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.
(4)A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
(5) For the purposes of this Act:
(a)a de facto relationship can exist between 2 persons of different sexes and between 2 persons of the same sex; and
(b)a de facto relationship can exist even if one of the persons is legally married to someone else or in another de facto relationship.
When 2 persons are related by family
(6) For the purposes of subsection (1), 2 persons are related by family if:
(a) one is the child (including an adopted child) of the other; or
(b)one is another descendant of the other (even if the relationship between them is traced through an adoptive parent); or
(c)they have a parent in common (who may be an adoptive parent of either or both of them).
For this purpose, disregard whether an adoption is declared void or has ceased to have effect.
In this case, looked at objectively and solely on the evidence and the objective evidence, it cannot be said that the Husband's case was hopeless. The wide variety of description of relationship in section 4AA covers the circumstance that where a party is looking back at a relationship many years later, many aspects of section 4AA(2)(a) through to (f), and I note section 4AA(3), can in the mind of that person convince them that there was a de facto relationship. In this case I have used the definition of section 4AA as a useful tool or measurement of whether in fact the parties had reconciled their intimate relationship of man and wife.
In this case there was much of the Wife's evidence that I did not accept. That does not mean that I found that she lied or misled me. But I was not persuaded of its correctness. In this case there was much of the Husband's evidence that I did not accept. That does not mean that I found that he lied or misled me. But I was not persuaded by many aspects of his case. In this case both parties invested a lot in their opinion that each was correct. Each expended very considerable expenses notwithstanding the efficiency of their solicitor on legal fees.
There were no offers for costs. There were no offers in writing or Calderbank offers. Looked at from that perspective and from the perspective of the judge making the decision, it appears to me that each party overestimated the strength of their case. I draw that inference from the lack of offers and Calderbank offers in the proceedings.
Balancing all of those matters and taking all of those matters into account, and I further refer to the events of the 2019 gala dinner, and I recite the following paragraphs of the first judgment:
[204]The Wife’s flat denial of the obvious appearance of closeness and affection between the Husband and Wife reduces my confidence in the reliability of her evidence. I do not accept the Wife’s evidence or explanation that these photos and this event showing apparent closeness and affection was merely because child [Ms F] asked for a photo at her celebration and “her father is her father”. That denial of the obvious appearance of the photo and there being no explanation for the photo that I accept, reduces my confidence in the reliability of the Wife’s evidence about the nature of the parties relationship. This event and the closeness between the parties in inconsistent and discordant with the Wife’s case and evidence and in consistent with the Husband’s case.
…
[206]It was not contested that photos 1 and 2 of -21 are photos of a dinner in 2019 of a charity where the Wife has a position of organisation. Photo 1 shows the Wife with fellow organisers. Photo 2 shows the Wife with other guests and it is not disputed that the Husband is seated next to her, although he is obscured and only partially pictured in the photo. There was no cross-examination about the event, or the Husband’s description of it or the photo. The Husband alleges he was introduced by the Wife as her husband to others at that event.
…
Balancing all of those matters and including the very significant financial disparity between the parties, and that an order for costs may well bankrupt the Husband, and I am not suggesting that straitened financial circumstances or impecuniosity is a bar or an indemnity for costs, but balancing all of those matters I am not satisfied that it is appropriate to make an order for costs in this case.
The application for costs is dismissed.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 31 March 2023
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