Michelaki & Michelaki
[2025] FedCFamC1F 248
•15 April 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Michelaki & Michelaki [2025] FedCFamC1F 248
File number(s): BRC 10946 of 2020 Judgment of: HOGAN J Date of judgment: 15 April 2025 Catchwords: FAMILY LAW – COSTS – Where the Third Respondent sought an order for indemnity costs to be shared jointly by the Applicant and First Respondent – Where the costs order sought related to the Third Respondent’s successful application for an order for specific performance of a contract for a sale of property – Where the Applicant and First Respondent oppose the costs order sought – Where the specific performance order was necessitated by circumstances which arose as a result of the First Respondent’s failure to comply with interim injunctive orders made by consent – Indemnity costs ordered against the First Respondent – Costs ordered in a fixed amount. Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
D & D Costs (No. 2) (2010) FLC 93-435; [2010] FamCAFC 64
Dongahey & Dongahey(Costs) (2012) 47 Fam LR 306; [2012] FamCA 231
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania) & Fish (2005) 33 Fam LR 123; [2005] FamCA 158
Harris & Dewell and Anor (No 2) (2018) FLC 93-863; [2018] FamCAFC 180
In the Marriage of Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664
Michelaki & Michelaki [2024] FedCFamC1F 818
Munday v Bowman (1997) 22 Fam LR 321; [1997] FLC 92-784
Prantage & Prantage (Costs) [2014] FamCA 850
Trevi & Trevi (No. 3) (2019) 60 Fam LR 15; [2019] FamCAFC 58
Yunghanns v Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: First Instance Number of paragraphs: 37 Date of last submission/s: 4 February 2025 Date of hearing: Determined in Chambers following the receipt of written submissions Place: Brisbane Counsel for the Applicant: Dr Ingelby of Counsel and Mr Pollock of Counsel by way of written submissions filed 28 January 2025 Solicitor for the Applicant: Hopgood Ganim Lawyers Solicitor for the First Respondent: Hartley Healey by way of written submissions sealed 9 January 2025 and filed 14 January 2025 in response Second Respondent: Excused from this aspect of the proceedings Solicitor for the Third Respondent: Brennans Solicitors and Migration Agents by way of written submissions sealed 14 January 2025 and by way of written submissions in reply filed 16 January 2025 and 4 February 2025 Fourth Respondent: Excused from this aspect of the proceedings Fifth Respondent: Excused from this aspect of the proceedings Sixth Respondent: Excused from this aspect of the proceedings ORDERS
BRC 10946 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MICHELAKI
Applicant
AND: MR MICHELAKI
First Respondent
C PTY LTD
Second Respondent
MR DRESDNER AS TRUSTEE FOR THE H TRUST (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
HOGAN J
DATE OF ORDER:
15 APRIL 2025
THE COURT ORDERS THAT:
1.By no later than 4.00 pm on 30 May 2025, the First Respondent pay the Third Respondent’s costs of and incidental to the Application in a Proceeding, deemed filed on 12 July 2024, fixed in the amount of $45,000.
2.Save as is provided for above, the Third Respondent’s application for costs is dismissed.
NOTATION:
A.There is no Court known by the name “Federal Circuit and Family Court of Australia”.
B.The design of the seal affixed to this order issued by the Federal Circuit and Family Court of Australia (Division 1) has been determined by the Attorney-General pursuant to the undated Federal Circuit and Family Court of Australia (Seal) Determination 2021 signed by the Attorney-General.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 Michelaki & Michelaki has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HOGAN J:
On 28 November 2024, for the reasons delivered that day,[1] I made an order[2] for specific performance of a contract for the sale of real property (the property) to the Third Respondent.
[1] Hu & Hu [2024] FedCFamC1F 818.
[2] Subsequently amended on 2 December 2024.
The property was owned by E Pty Ltd. The First Respondent was the sole director of the company and, via another entity (F Pty Ltd), had a 50 per cent shareholding in it; three others who were not parties to the proceedings owned the balance of the shares in the company.
By submissions filed on 14 January 2025, the Third Respondent sought that the Court order the Applicant and First Respondent to jointly pay his costs of and incidental to his application for specific performance on an indemnity basis, fixed in the amount of $238,243.69 or, in the alternative, fixed in the amount of $214,537.79, calculated on a party and party basis.
As accurately submitted on behalf of the First Respondent, such costs are clearly exorbitant.
The First Respondent opposed the Third Respondent’s application for costs; he submitted[3] that, should the Court be persuaded that the circumstances justify the making of an order for costs, it would also be persuaded that it is just that the order provide for costs to be calculated on the party and party basis and that the same be fixed in the amount of no more than $64,000.
[3] Written submissions filed 9 January 2025.
The Applicant also opposed the making of any order for costs in the Third Respondent’s favour – she submitted[4] that the Court would not be persuaded that the circumstances justify the making of an order for costs against her and that, accordingly, the only order[5] should be that there be no order as to costs.
[4] Written submissions filed 28 January 2025
[5] Other than one formally dismissing the application for costs.
Relevant principles and the application of the same
The starting point in relation to costs under the Family Law Act 1975(Cth) (the Act) is that each party bears their own costs.[6] However, if it is of the opinion that there are circumstances that justify it in doing so, the Court may, subject relevantly to s 117(2A) of the Act, make such order as it considers just.[7] In considering what order, if any, as to costs should be made, the Court must have regard to the matters set out in s 117(2A) of the Act. The Court may give such weight as it considers appropriate to any relevant matter;[8] it is well settled that no single matter set out in s 117(2A) has priority, nor must more than one matter be established; rather, any one of the listed matters may be sufficient to persuade of the existence of circumstances justifying the making of an order that one party pay the costs of another.[9]
[6] Family Law Act 1975 (Cth) s 117(1).
[7] Family Law Act 1975 (Cth) s 117(2).
[8] Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24].
[9]Prantage & Prantage (Costs) [2014] FamCA 850 at [12]; Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123 at [41].
No parties were in receipt of Legal Aid; all engaged privately funded legal representation.
The parties’ respective financial circumstances[10]
[10] Family Law Act 1975 (Cth), s 117(2A)(a).
The Third Respondent submitted that, when considering the financial circumstances of the Applicant and First Respondent, the Court would take into account that:
(a)the total net value of the property the subject of the proceedings between them was between $11,255,417 and $11,500,000; and
(b)according to the Costs Notice filed by the First Respondent on 22 July 2024, he had incurred legal fees to his current solicitors of $447,221.06, as well as $29,229.46 in third party fees – there was also $24,885 of work in progress and $213,717.03 was held in trust; and
(c)according to the Costs Notice filed by the Applicant on 22 July 2024, she had incurred legal fees to her current solicitors in the sum of $319,470, as well as $56,259.47 in disbursements – there was also $94,209.54 of work in progress and $316,058.05 was held in the general trust account.[11]
[11] Whilst other funds were held in trust, it appears that these were the property of corporate entities.
The Applicant’s submissions did not specifically deal with the issue of the parties’ financial circumstances. The First Respondent accepted that the net value of the property of the parties for the purpose of the overarching property settlement was between $11,255,417 and $11,500,000 – however, it was submitted on his behalf that the Court would take into account that he required the cash he would receive pursuant to the final orders made by consent on 20 December 2024 to pay off substantial liabilities, and that he owned few liquid assets such as cash or investments.
No party addressed the Third Respondent’s financial position other than by way of assertions made on his behalf about matters such as the interest said to have been lost on the purchase price and paid in relation to alternative property. I accept the submissions made on behalf of the First Respondent[12] about the how the Third Respondent’s claim for what was described as “non-legal costs” should be dealt with.
Whether any party has been wholly unsuccessful[13]
[12]Written Submissions on behalf of the First Respondent sealed 9 January 2025 at paragraphs 40 to 50 (inclusive).
[13] Family Law Act 1975 (Cth), s 117(2A)(e).
The Third Respondent submitted that the Applicant had been wholly unsuccessful in her opposition to the specific performance of the contract for the sale of the property on the basis that the contract into which he had entered with E Pty Ltd, acting under the First Respondent’s direction, was illegal. It was submitted that the Applicant’s opposition to the completion of the contract was the conduct which necessitated him becoming embroiled in the property settlement proceedings between the Applicant and the First Respondent.
The Applicant submitted that, as the Third Respondent had unsuccessfully advanced the argument – also disposed of by the November 2024 orders – that the Judicial Registrar who made consent orders on 4 October 2022 had no power to grant the injunctive relief ordered, she should not be regarded as having been “wholly unsuccessful in the proceedings”. However, I consider that this submission seeks to conflate two quite separate matters which were raised during the consideration of the July 2024 Application – the first being whether the Court should order specific performance of the contract for the sale of the property and the second being whether the Judicial Registrar who made the October 2022 consent orders (which restrained the First Respondent from selling, mortgaging, transferring, assigning, dissipating or otherwise dealing with assets of the parties that were valued at more than $10,000) acted without power. Whilst the Third Respondent was unsuccessful in his attempt to advance the latter argument, he succeeded in having the order for specific performance made.
The First Respondent submitted that, whilst it could be said that the Applicant was wholly unsuccessful in her opposition to the order for specific performance, her conduct was not unreasonable in the circumstances: it was submitted that she was entitled to seek to retain the property the subject of the contract, which he had caused E Pty Ltd to enter into with the Third Respondent, via seeking the shares in that entity.
The conduct of the parties in relation to the proceedings and other relevant matters[14]
[14]Family Law Act 1975 (Cth), s 117(2A)(c) and (g); see, for example: Dongahey & Dongahey (Costs) (2012) 47 Fam LR 306.
The Third Respondent submitted that the combination of:
(a)the First Respondent’s failure to comply with the October 2022 order (which, amongst other things, restrained him from selling the property without the Applicant’s written consent); and
(b)the Applicant’s attempt to seek to retain the property (by lodging a caveat against the title to the property on 30 August 2024 – albeit one that was promptly subsequently removed following orders made by Howard J on 16 July 2024 for the removal of the same) notwithstanding it was subject to an unconditional contract for a price which was $250,000 more than the joint valuation she and the First Respondent had obtained,
in essence forced him to apply to the Court for an order for specific performance and required that he incur the costs associated with that application.
Whilst the First Respondent accepted that, by signing the contract for sale without the Applicant’s consent, he did not comply with the October 2022 consent orders, he submitted that the costs incurred by the Third Respondent was the product of the Applicant’s conduct in lodging a caveat against the title of the property, objecting to the contract settling and opposing the Third Respondent’s application for an order for specific performance.
However, the Applicant submitted that, if the First Respondent had complied with the restraint to which he consented when the October 2022 order was made, the contract for sale would not have been signed and the subsequent application for specific performance of the same by the Third Respondent could never have been made – in that way, it was submitted in essence, the entire involvement of the Third Respondent was the consequence of the First Respondent’s conduct.
Whether an offer to settle the proceedings was made in writing and the terms of the same[15]
[15] Family Law Act 1975 (Cth), s 117(2A)(f).
I accept that the solicitors for the Third Respondent wrote to the Applicant’s solicitors on a number of occasions about the issue of the settlement of the contract for the sale of the property.
I accept that, on 10 June 2024, the Third Respondent’s solicitors advised the Applicant’s solicitors of their view that the caveat lodged by the Applicant had been lodged improperly; they also explained why they said the Third Respondent would be successful in his attempt to have the caveat removed and asked that the Applicant consent to the sale of the property.[16] I accept that, on 26 June 2024, the Applicant’s solicitors advised the Third Respondent’s solicitors that the Applicant intended to withdraw the caveat; they also asserted (amongst other things) that, unless the Third Respondent wanted to be complicit in facilitating the First Respondent’s breach of the orders, the sale of the property could not be completed.[17]
[16] Affidavit of Mr Dresdner sealed 23 December 2024, annexure RK-05.
[17] Affidavit of Mr Dresdner sealed 23 December 2024, annexure RK-06.
I accept that, on 21 July 2024, the Third Respondent’s solicitors wrote again to the Applicant’s solicitors. I accept that, in this correspondence, they asserted that, if settlement could occur prior to the commencement of the trial, then there would not be any further unnecessary legal costs incurred – they noted that the Applicant was guaranteed to receive $250,000 in excess of the property’s market value, which would mean that the total net value of the property of the relevant parties would be increased by this amount. I accept that, in this correspondence, the Third Respondent’s solicitors outlined why the property uniquely suited his requirements and asked that the Applicant reconsider her position and consent to the settlement of the contract.[18]
[18] Affidavit of Mr Dresdner sealed 23 December 2024, annexure RK-10.
I accept that, on 22 July 2024, the Applicant’s solicitors advised the Third Respondent’s solicitors that her position had not changed and that she remained opposed to the sale of the property to the Third Respondent.[19]
[19] Affidavit of Mr Dresdner sealed 23 December 2024, annexure RK-11.
Further discussion and conclusions
The First Respondent submitted that the Court would not be persuaded that the circumstances justify it exercising its discretion to make an order for costs in favour of the Third Respondent; he submitted that the Court would not be persuaded that the circumstances justify departing from the general position that each party shall pay his or her own costs. If, however, the Court was in fact persuaded that the circumstances justify making an order that he pay the Third Respondent’s costs, the same should, for the reasons expressed in the written submissions filed on his behalf, be fixed in the amount of no more than $64,000. The First Respondent also submitted that he and the Applicant should be required to meet any order for costs jointly.
The Applicant submitted that, given the First Respondent’s conduct in causing the contract for the sale of the property to be executed with the Third Respondent without first obtaining her consent to the same (as he was required to do pursuant to the October 2022 consent order), the Court would not be persuaded that the circumstances justify the making of an order that she pay any of the Third Respondent’s costs associated with his successful application for an order for specific performance of the contract.
Whilst the Applicant’s continued opposition to the completion of the contract – once she became aware that the First Respondent had caused the contract for the sale of the property to be signed with the Third Respondent and that the Third Respondent wanted the settlement of the same to complete – resulted in the application for specific performance successfully prosecuted by the Third Respondent, I consider that the First Respondent was entirely responsible for the position in which the Applicant found herself: had he followed the terms of the October 2022 consent order as he was bound to do, the contract with the Third Respondent for the sale of the property may well not have been signed and that which followed would not have occurred.
Given these conclusions, I consider that the circumstances justify the making of an order that the First Respondent pay the Third Respondent’s costs of and incidental to the successful application for an order for specific performance of the contract – and that it is just that he be required to do so – but do not justify the making of an order that the Applicant pay any of such costs.
Such conclusion does not, of course, determine the parties’ competing positions about how the quantum of costs to be paid by the First Respondent should be calculated. As noted earlier, the Third Respondent submitted that costs should be awarded on an indemnity basis and should be fixed in the amount of $238,243.69 (or, alternatively, if the Court considers it just to award costs on the party and party basis, the same should be fixed in the amount of $214,537.79) whereas the First Respondent submitted that costs should be awarded on the party and party basis and should be fixed in an amount of no more than $64,000.
Indemnity costs
Well-known authority makes it clear that, unless there are exceptional circumstances, an order for costs should be made on the party and party basis; I accept that to order costs to be paid on an indemnity basis is something which is a “very great departure” from the “normal standard” in this jurisdiction[20] - particularly given the statutory starting point that parties shall bear their own costs.
[20]See Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J; In the Marriage of Kohan (1993) FLC 92-340; Munday v Bowman (1997) 22 Fam LR 321 at 322; Yunghanns v Yunghanns (2000) FLC 93-029; D & D Costs (No. 2) (2010) FLC 93-435; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; Trevi & Trevi (No. 3) (2019) 60 Fam LR 15 at [12] to [15]; Harris & Dewell and Anor (No 2) (2018) FLC 93-863.
I accept that the categories of circumstances which enliven the discretion to award indemnity costs are not closed.[21] However, in Colgate-Palmolive Company v Cussons Pty Limited,[22] Shepherd J provided some examples of circumstances that might justify the awarding of indemnity costs – usefully, Holden CJ in Munday v Bowman,[23] drew the following from his Honour’s decision:
(a)where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts; and
(b)making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud; and
(c)evidence of particular misconduct causing loss of time to the court and to other parties; and
(d)the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and
(e)an imprudent refusal of an offer to compromise.
[21] Yunghanns v Yunghanns (2000) FLC 93-029 at [31].
[22] (1993) 118 ALR 248.
[23] (1997) 22 Fam LR 321 at 322.
The Third Respondent submitted that an order for costs paid on the indemnity basis was appropriate in this case because the Court would be satisfied that there was evidence of “particular misconduct causing loss of time to the court and to other parties” and also that there was “an imprudent refusal of an offer to compromise”. In particular, it was submitted that:
(a)it was clear that the First Respondent caused the contract for the sale of the property to be signed when he was the subject of an injunction, made on 4 October 2022 by consent, which prohibited him doing this without the Applicant’s consent; and
(b)the Applicant's failure to withdraw her objection to the settlement of the contract (which necessitated the application for an order for specific performance) arose in circumstances where the unconditional contract price was for $250,000 more than the parties’ joint valuation of the property and – particularly where E Pty Ltd, which was to receive the proceeds of sale of the property, was included in the property of the relevant parties which was the subject of the property settlement proceedings between the Applicant and the First Respondent – amounted to “an impudent refusal of an offer to compromise”; and
(c)an order for costs to be paid on an indemnity basis reflected the exceptional circumstances of the case and the costs expended by him in obtaining specific performance of a contract entered into in good faith.
The Third Respondent also submitted that, having regard to the First Respondent’s Cost Notice filed 22 July 2024, the likely impact on him if an order for costs was made in the amount primarily sought would not be dire – although it was accepted that it could not be regarded as inconsequential. Again, this seems to me to be a significant understatement.
The First Respondent submitted that, whilst it was not disputed that he had failed to comply with the October 2022 order by signing the contract for the sale of the property in his capacity as director of E Pty Ltd without the Applicant’s consent, his actions did not, in the circumstances, amount to conduct which resulted in a significant loss of time to the Court or to other parties; it was submitted that he never opposed the relief sought by the Third Respondent (save in relation to the issue of costs) and, in essence, that there was no evidence to support the contention that, in maintaining her position in circumstances where she attributed special value to the property (that, it was said, could not be adequately compensated by the purchase price being greater than the agreed value of the property), the Applicant’s conduct amounted to an imprudent refusal of an offer to compromise the proceedings – and certainly did not constitute conduct for which he should be held liable in costs calculated on an indemnity basis.
Whilst others may disagree, I am persuaded by the very particular circumstances of this case that it is just that the First Respondent be required to pay the Third Respondent’s costs of and incidental to the application for specific performance on an indemnity basis; as already expressed, his conduct in failing to obtain the Applicant’s consent to him causing the entry into the contract for sale of the property with the Third Respondent is, ultimately, entirely responsible for the circumstances surrounding the Third Respondent’s successful application for an order for specific performance – an application which saw property (which the Applicant sought to retain) sold to the Third Respondent without the Applicant’s consent to the disposition of the same.
My conclusion that the circumstances here are such as to justify the awarding of costs calculated on an indemnity basis does not mean, though, that I am persuaded that it is just that the amount of the same be the amount sought by the Third Respondent. To say, as I have already, that the amount sought is exorbitant completely and significantly understates the situation.
I accept the submissions made on behalf of the First Respondent to the effect that the quantum of costs to be paid, calculated on the indemnity basis, should properly take into account that the essence of the successful application for an order for specific performance was not overly complex, did not require cross-examination and took up approximately five hours of the Court’s time; I also accept that it was easily within the remit of a single junior Counsel. Whilst it was a matter for the Third Respondent to decide whether to engage Counsel to appear at those appearances prior to that at which the application for specific performance was ultimately argued, I am not persuaded that it was necessary for Counsel to appear at each of the same. I am completely unpersuaded that the claim for more than 100 hours of chamber work (as discussed at paragraph 58 of the First Respondent’s written submissions) is either reasonable or proportionate to the Third Respondent’s application for an order for specific performance.
Whilst the Third Respondent’s application for specific performance was listed to be heard on the first day of the property settlement trial, it was, I consider, entirely foreseeable that, given his involvement in the overall property settlement proceedings was limited to the determination of his application for specific performance of a contract relating to only one piece of property, the Court would approach its determination of this issue in the way that occurred – that is, to hear the parties about it and to excuse the Third Respondent from further attendance.
I accept the force of the submissions to the effect that the Court should be persuaded to fix the amount of costs payable so as to avoid the delays and further legal costs which would be incurred if the parties proceeded with the assessment process provided by Chapter 12 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). Noting that the legal costs incurred by the Third Respondent (which provide the basis for his claim against the First Respondent) must be fairly, reasonably and proportionately incurred and must be fair, reasonable and proportionate in amount to the circumstances of the proceedings, I consider, in the exercise of the broad discretion entrusted to judges at first instance in determining applications for costs on whatever basis, that the amount which it is just that the First Respondent is required to pay to the Third Respondent is $45,000. I have arrived at that amount by allowing the sum of $25,000 by way of professional costs incurred by the Third Respondent’s solicitors, together with total disbursements for Counsel (whomever was engaged at whatever time) in the amount of $20,000.
The total amount of $45,000 is, in my view, reasonable and proportionate to the Third Respondent’s claim for an order for specific performance. I also consider it appropriate and just that the First Respondent have until 4.00 pm on 30 May 2025 within which to make this payment to the Third Respondent.
I certify that the preceding thirty-seven (37) numbered paragraph are a true copy of the Reasons for Judgment of the Honourable Justice Hogan. Associate:
Dated: 15 April 2025
SCHEDULE OF PARTIES
BRC 10946 of 2020 Respondents
Fourth Respondent:
MS J MICHELAKI
Fifth Respondent:
K PTY LTD AS TRUSTEE FOR THE K DISCRETIONARY TRUST
Sixth Respondent:
MS L MICHELAKI
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