MIDDEN & GALLOWAY
[2015] FCCA 1897
•23 July 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MIDDEN & GALLOWAY | [2015] FCCA 1897 |
| Catchwords: FAMILY LAW – Application for security for costs application pending – application for extension of time to make settlement by the applicant on the respondent. |
| Legislation: Family Law Act 1975 |
| B & B (1986) FLC 91-749 at [75,479] Luadaka v Luadaka (1998) FLC 92-830 at [85506] |
| Applicant: | MR MIDDEN |
| Respondent: | MS GALLOWAY |
| File Number: | DNC 199 of 2012 |
| Judgment of: | Judge McGuire |
| Hearing date: | 26 June 2015 |
| Date of Last Submission: | 26 June 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 23 July 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Norrington |
| Solicitors for the Applicant: | DS Family Law |
| Counsel for the Respondent: | Mr Robertson |
| Solicitors for the Respondent: | Butcher Paull & Calder |
ORDERS
An amount of $169,220.00 be preserved from the settlement monies to be paid by Mr Midden to Ms Galloway as security for costs for the costs applications pending and made by Mr Midden such listed for hearing before Judge McGuire on 31 August 2015. With such monies to be placed in a trust account with the solicitors on the record for Mr Midden and in an interest bearing account with the interest to be the property of Ms Galloway.
The Application in a Case filed 11 June 2015 be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Midden & Galloway is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
DNC 199 of 2012
| MR MIDDEN |
Applicant
And
| MS GALLOWAY |
Respondent
REASONS FOR JUDGMENT
Mr Midden is the applicant in an Application in a Case filed 11 June 2015. His application is supported by an Affidavit affirmed that day. There are two discrete issues for my determination being:
i. That Mr Midden be given an extension of time of 120 days to settle a cash adjustment on Ms Galloway in an amount of $414,236.00 pursuant to my orders of 25 February 2015 in substantive property proceedings between these parties;
ii. That there be an order for security of costs in favour of Mr Midden in a quantum of $169,220.00 such to be held in trust from the settlement monies pending the hearing of Mr Midden’s various cost applications in respect of the substantive property proceedings before me, a previous Trial before Judge Harland (which was the subject of appeal remitted hearing to me) and sundry other matters.
These parties litigated property matters before me in Darwin between 20-23 October 2014. My judgment was delivered on 25 February 2015. Mr Midden seeks costs of and incidental to the Trial. He seeks the costs of the previous Trial before Judge Harland in 2013. There are sundry other issues of costs between the parties. There have been contemporaneous proceedings in the Supreme Court of the Northern Territory.
My final orders provided inter alia that Mr Midden pay to Ms Galloway a lump sum of $414,236.00 within 120 days of the orders of 25 February 2015. It is conceded that those monies have not been paid and hence Mr Midden seeks an extension of a further 120 days.
The application in a case also sought what was effectively enforcement of orders made by me that Ms Galloway executes various withdrawals of Caveats. I am not now required to determine that issue as the relevant documents were signed at Court on the day of this hearing.
Extension of Time
My order provided Mr Midden with 120 days to settle on Ms Galloway in a sum of $414,236.00. That was not an arbitrary period of time. [152] of my reasons specifically addresses this issue and Mr Midden needing time to accrue the settlement funds including from the possible sale of real estate. The period of 120 days would, in my experience, be longer than the usual settlement period and was made specifically as to the circumstances in this matter. Ms Galloway was given 21 days from the date of the orders to execute the withdrawals of caveats (which she did not complete until the day of this hearing being some three months out of time).
Mr Midden argues primarily that he has not been able to obtain finance because Ms Galloway has not signed the withdrawals of caveat. I do not accept this argument. It is trite to note that the lodgement of a caveat may give notice to other parties intending to lodge an instrument or may, at least, prevent a prudent purchaser or mortgagee from settling a purchase. It does not, however, and should not, prevent the mechanics of dealing with banks so as to obtain approval for finance. Mr Midden does not give evidence of any contracts of sale on particular parcels of property and it appears that he will therefore, be reliant on bank finance to settle on Ms Galloway. Further, there is no evidence before me to show that Mr Midden has even commenced the preliminaries of the process of obtaining finance. His evidence suggests that he has simply waited until he obtained the withdrawals of caveat before commencing that process.
Still further, Mr Midden offers no explanation as to why he has not commenced these proceedings or taken action in these Courts to secure the withdrawal of caveats until now. Ms Galloway’s obligation of 21 days expired in about mid-March 2015. This application was not lodged until 11 June 2015 giving a hiatus of some three months.
In short, Mr Midden has not, in my view, acted prudently so as to “mitigate his damages”. I am not persuaded that the simple fact of the failure to sign withdrawals of caveat has directly impacted on Mr Midden himself not complying with the order to make a cash settlement on Ms Galloway. It follows that I am not persuaded that there should be an extension of time in respect of that order and the settlement monies remain due and owing.
Security for costs
The applicant is effectively asking for the Court to preserve an amount of $169,220.00 from the settlement monies owed to Ms Galloway as security for his pending costs application set out above. Those applications are listed for hearing before me on 31 August 2015.
As Gee J observed in B & B[1]:
It is clear from the perusal of the Act and in particular sec. 117(2) and (2A) that the Court as a wide discretion to make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the Court thinks just. The proviso is that the Court must be of opinion that there are circumstances that justify it in so doing and that the Court has regard to the matters set out in sec. 117(2A).
[1] (1986) FLC 91-749 at [75,479]
Matters of costs are dealt with pursuant to section 117 of the Family Law Act 1975 (Cth) (“the Act”). S.117(1) provides the general proposition:
Subject to subsection (2), and sections 117AA and 118, each party to proceedings under this Act shall bear his or her own costs.
Section 117(2), however, provides:
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) and (5) 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.
And s.117(2A) continues:
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.
As Butler J noted in Brown & Brown; Eley and Henty (Interveners)[2] :
Costs security orders prevent abuse of Court process by inter alia preventing impecunious persons from litigating without responsibility. An appropriate example is the issuing of Mareva injunctions…
Generally orders are made where the defendant is an unwilling participant in the litigation and should not be prejudiced by the plaintiff's lack of funds.
[2] (1991) FLC 92-265 at [78778]
The circumstances here are unusual, although not unique, and differ from those contemplated by Butler J. The substantive proceedings here have been finalised. The applicant brings a costs application. He wishes to secure the possible fruits of that application and argues that such may be avoided by the respondent.
The Full Court in Luadaka v Luadaka[3] noted the unfettered nature of the discretion of the Courts in respect of costs or security of costs but offered some “guidelines” borrowed from the text: Quick on Costs, Vol 1 at follows:
[3] (1998) FLC 92-830 at [85506]
(1) the circumstances of those behind the proceedings and whether it is reasonable for those persons to satisfy an order for security;
(2) the bona fides and prospects of success of the proceedings;
(3) whether the plaintiff is impecunious and whether the defendant's conduct has caused or contributed to this impecuniosity.
(4) whether the plaintiff is in effect a defendant because, for example, it has been forced to litigate to halt self-help measures by the defendant;
(5) whether it will be oppressive to order security for costs or such an order will prevent the plaintiff from pursuing the proceedings;
(6) whether the proceedings raise a matter of public importance;
(7) whether there has been an admission, offer or payment into court;
(8) whether there has been any delay in bringing the application for security which has occasioned prejudice;
(9) the cost of enforcement;
(10) the costs of the proceedings.
I have no evidence or suggestions before me that the Applicant’s application for costs is not made bona fide.
Both of the parties are in employment or self-employment. My findings in the substantive judgment at [116] gives the respondent an income of $1,200.00 per week. She is not therefore technically impecunious. Nevertheless those same orders at [156] see the respondent retaining the following assets absent the cash adjustment of $414,236.00:
Asset
Furniture $8,000
Shareholdings $980
Cash at bank $7,000
Proceeds – Property B $99, 737
TOTAL: $115, 717
Liability
(omitted) Bank credit card $18, 200
NET ASSETS RETAINED: $97, 517
In her affidavit sworn 24 June 2015, in respect of this application, at [26-27] the respondent deposes:
[26] I intend to utilise the payment to buy somewhere to live within Australia, I have been without stable accommodation since the onset of these proceedings and am hoping that with this money I can purchase a small apartment or home to live in.
[27] I do not intend to transfer the funds overseas.
This is not a matter in which either party has benefited from the grant of legal aid.
This is not a matter where proceedings were necessitated by the failure of either party to comply with previous Court orders. Similarly, it is not a matter in which offers of settlement are relevant or where either of the parties has been wholly unsuccessful in a suit.
The force of the respondent’s opposition to an order for security of costs is that it would be oppressive to her. She has an entitlement of some $414,236.00. She says that she wishes to purchase a property with those monies. It is clear that Mr Midden is already out of time with the making of the payment to Ms Galloway. Further, the costs application is not to be heard until 31 August 2015 being some two months from this application. I agree that the costs applications are complex in that they involve matters other than the Trial conducted before me and that it is likely that my determination will be reserved for a period for consideration. All of these combine to potentially prejudice Ms Galloway in the denial of the fruits of her litigation. I place some weight on this consideration.
The applicant argues simply that should he be successful in his costs applications then there is a strong likelihood that he would not achieve the benefit of any order given Ms Galloway’s credit and history of dealing with finances. Specifically, he argues that there is already an outstanding costs order in his favour made by May J at the appeal of the judgment of Judge Harland. The quantum of that unsatisfied costs order is $2,666.68.
He says further, that my findings of credit made at the Trial argue against Ms Galloway meeting any costs order. He says that Ms Galloway has the capacity to “hide” monies away and perhaps overseas. He points to my description of her in my reasons as a “savvy business woman” who is well experienced and versed in monetary dealings off-shore.
Issues of credit at the Trial focused in a large part on Ms Galloway’s financial position and her history. At [54] I made the following findings:
[54] I did not find the first respondent, Ms Galloway, generally to be a good or credible witness. She was often argumentative, unresponsive and evasive in her answers in cross-examination. Her evidence at times was contradictory and I gained the impression that she was at times keen to a fault to shore up her own case. She impressed me as an able and intelligent person well versed in financial matters, but prone to be argumentative or selective in her evidence and disclosures in cross-examination. Unlike the applicant, the first respondent, was steadfast in her refusal to make concessions in favour of the applicant or against interest. Any such concession that was forthcoming was only at the last moment and only when “cornered” by intrusive cross-examination.
At [55] I find:
[55] I generally found the first respondent to be an unimpressive and unsatisfactory witness and not always a witness of the truth in its fullest sense.
At [56] I make the following findings:
… The first respondent is accused of destroying and doctoring documents relevant to these proceedings and which by implication do not assist her case… I am satisfied on the balance of probabilities that the first respondent has avoided making disclosure where such disclosure might harm her case or assist the applicant’s case and such that has been made has occurred only at the last moment including during her cross-examination before me in what was, of course, the second trial of these issues, and certainly not in a voluntary fashion. A partly burned and retrieved document was tendered in evidence before me. Frankly, the first respondent’s claim that she habitually burned aged or irrelevant documents was unconvincing and I prefer, on the balance of probabilities that she has entered into a deliberate course of burning or disposing of relevant documents for the direct purpose of destroying evidence that is not supportive of her case in this court…
In opposing the application for security for costs I note and give some weight to the respondent’s Counsel’s argument as to the oppressive nature of such an order and also of the respondent’s position as a company director that would be placed in jeopardy should she chance bankruptcy by the avoidance of the payment of any costs order. Conversely, however, the respondent offers no explanation for her failure to meet a costs order dating from 2014. The relatively minimal quantum of that order, in my mind, serves only to aggravate its non-payment rather than mitigate it. My findings at the Trial in respect of the respondent’s credit and specifically with respect of her lack of candicy in relation to disclosure and in the destroying of documents are also a factor of some weight in my determination.
On consideration, and on the balance of probabilities, I am persuaded that there should be an order for security of costs in this matter. The respondent has an unexplained outstanding order for costs against her. She does not otherwise have assets which could be attached to secure any successful costs application. She was not immediately forthcoming in respect of her personal financial position at the Trial before me. Nevertheless, any prejudice to Ms Galloway can be mitigated to a degree by the funds required to secure the application for costs being placed in an interest baring trust account in her name pending these proceedings being finalised. To this end Ms Galloway might need to provide her tax file number to Mr Midden’s Solicitors who I believe are the appropriate firm to hold the monies on security
I will make orders accordingly.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 23 July 2015
Key Legal Topics
Areas of Law
-
Civil Procedure
-
Insolvency
Legal Concepts
-
Costs
-
Jurisdiction
0