Ming & Dao (No. 3)
[2021] FamCA 197
•14 April 2021
FAMILY COURT OF AUSTRALIA
Ming & Dao (No. 3) [2021] FamCA 197
File number(s): SYC 8463 of 2017 Judgment of: ALTOBELLI J Date of judgment: 14 April 2021 Catchwords: FAMILY LAW – COSTS – costs sought following interim property proceedings – uncertainty concerning the financial circumstances of the parties – no conduct justifying a costs order – costs reserved pending final determination. Legislation: Family Law Act 1975 (Cth) ss 117, 117(2A)
Family Law Rules 2004 (Cth) r 19.18
Cases cited: Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Cross v Beaumont (2008) 39 Fam LR 389; [2008] FamCAFC 68
D & D (Costs) (No. 2) (2010) FLC 93-435; [2010] FamCAFC 64
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 202
In the Marriage of I & I (No 2) (1995) FLC 92-625; [1995] FamCA 80
J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (No 2) (1993) 46 IR 301; [1993] FCA 70
Kohan and 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) 54 FLC 93-664; [2015] FamCAFC 157
Ming & Dao (No. 2) [2020] FamCA 1124
Ming & Dao [2018] FamCA 430
Ming & Dao [2020] FamCA 726
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Penfold v Penfold (1980) 28 ALR 213; [1980] HCA 4
Phillips & Hansford [2020] FamCAFC 28
Number of paragraphs: 42 Date of last submission/s: 16 February 2021 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: Diamond Conway Lawyers Solicitor for the Respondent: Pigdon Norgate Family Lawyers ORDERS
SYC 8463 of 2017 BETWEEN: MS DAO
Applicant
AND: MR MING
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
14 APRIL 2021
THE COURT ORDERS THAT:
1.The wife’s costs of and incidental to the Application in a Case filed 3 December 2020 be reserved for determination at the conclusion of these proceedings.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ming & Dao has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Altobelli J
These reasons for judgment concern an application for costs of and incidental to interim property proceedings that were heard before me on 14 December 2020. I have determined that the question of costs be reserved pending final determination of the matter and my reasons for doing so are what follows.
BACKGROUND
This matter was initially brought before me on 14 December 2020 for the hearing of an urgent Application in a Case filed by the husband on 3 December 2020. That application sought, among other things, orders with respect to the distribution of the proceeds of sale of a property jointly owned by the parties. The matter now comes before me as a costs application, filed by the wife on 23 December 2020, in which she seeks that the husband pay her costs of and incidental to that application.
I delivered reasons for judgment orally and made orders in the matter on 16 December 2020. I ordered that the husband’s Application in a Case be dismissed and that the proceeds of sale of the subject property be distributed largely in alignment with the proposal advanced by the wife contained in her Response to the Application filed 10 December 2020. It is not necessary to otherwise traverse the history of the matter or the interim proceedings before me, and in this respect, I refer to my substantive judgment, which is reported as Ming & Dao (No. 2) [2020] FamCA 1124, as well as the previous judgments of Watts J, Ming & Dao [2018] FamCA 430, and Austin J, Ming & Dao [2020] FamCA 726, each of which canvasses the history of these proceedings and the issues in dispute.
Upon receipt of the wife’s costs application, I made orders in Chambers that each party file and serve written submissions with respect to the same. The parties have subsequently filed, and I have had regard to, the following documents:
(a)Application in a Case filed by the wife on 23 December 2020;
(b)Affidavit of the wife filed on 23 December 2020;
(c)Affidavit of the wife filed on 22 January 2021;
(d)Written Submissions filed on behalf of the wife on 22 January 2021;
(e)Response to an Application in a Case filed by the husband on 5 February 2021;
(f)Affidavit of the husband filed on 5 February 2021 and corresponding tender bundle;
(g)Written Submissions filed on behalf of the husband on 5 February 2021; and
(h)Submissions in Reply filed on behalf of the wife on 16 February 2021.
LEGAL PRINCIPLES
The law relating to costs in family law proceedings is well settled and is set out in detail in the Full Court decision of Parke & The Estate of the Late A Parke [2016] FamCAFC 248.
An application for costs is governed by s 117 of the Family Law Act 1975 (‘the Act’). Section 117(1) of the Act sets out the general presumption that each party to the proceedings shall bear their own costs. This is subject to s 117(2), which provides that:
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) and (5) and the applicable Rules of Court, make such order as the court may make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) sets out the matters that the Court is to have regard to:
(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.
Although the Court is required to consider each of the abovementioned factors, it is plain that their relevance to a particular matter will depend upon the circumstances of that case and they should be considered in that light. That is, no one factor prevails over another and it is a question of the weight that is to be afforded to each of the relevant factors depending on the circumstances of the matter: Medlon & Medlon (No 6) (Indemnity Costs) [2015] FamCAFC 157 at [24].
Whilst the applicant in a costs application must establish the circumstances justifying the making of a costs order, the Court is not limited to making such an order only in what has been described as a "clear case": Penfold v Penfold (1980) 28 ALR 213 at 217.
THE APPLICATION FOR COSTS
The orders sought by the wife are particularised in her written submissions filed 22 January 2021, and are as follows:
1. That the Respondent Husband pay the Applicant Wife's costs of the appeal as follows:
1.1. On an indemnity basis being an amount fixed in the sum of $37,449.51.
1.2. In the alternative to paragraph 1.1 on an indemnity basis as agreed or assessed with the same to be paid within 14 days of any agreement or assessment.
1.3. In the alternative to paragraphs 1.1 and 1.2 hereof on a solicitor/client basis with such costs to be fixed in the sum of $28,087.
1.4. In the alternative to paragraphs 1.1, 1.2 and 1.3 hereof on a solicitor/client basis as agreed or assessed with the same to be paid within 14 days of any agreement or assessment.
The husband resists the wife’s Application, and in his Response proposes that:
1. The Wife’s Application in a Case filed 23 December 2020 be dismissed.
2. In the alternative to Order l, the matter of the payment of the Wife’s costs as outlined in her Application in a Case filed 23 December 2020 be reserved for determination at the final hearing of this matter.
3. In the alternative to Order 2, costs be as assessed.
4. The Wife pay the costs of and incidental to this application.
CONSIDERATION
Costs orders are made at the Court's discretion based on the factors listed in s 117(2A) of the Act. The wife contends that the circumstances which justify the making of an order for costs in this matter arise from subsections (c), (e) and (g) of s 117(2A). However, it is plain that all of the factors listed in s 117(2A) must be considered, and no one factor takes precedence over another: In the Marriage of I & I (No 2) (1995) FLC 92-625. I therefore propose to consider each of the matters contained within s 117(2A) in the paragraphs that follow.
Section 117(2A)(a): Financial circumstances of the parties
In my view, the parties’ financial circumstances are a significant aspect of this application for costs, and this is a matter to which I place great weight.
The husband’s primary contention is that he does not have the financial capacity to pay the wife’s costs. At paragraph 12 of his submissions he summarises his financial position as follows:
12.1. The Husband holds an interest in 2 companies which own 2 businesses, T Pty Ltd and BB Business, currently being valued by Ms P. The Husband’s value of his interest in these companies is likely to be nil.
12.2. The Husband does not draw an income.
12.3. The Husband’s personal bank account balance is $684.13, and his credit card liabilities are $11,123.
12.4. The Husband is in receipt of spousal maintenance ordered after a contested hearing from the Wife in the amount of $1,944 per week. To date, the Husband has funded his legal costs from payments by the Wife in the sum of $200,000.
12.5. Upon the settlement of the sale of the Suburb B Property, the Husband received $215,054.63, which was paid directly to his solicitor’s trust account. $113,663.93 remains, which will be required for the ongoing payment of legal costs.
Further to this, in his Affidavit filed 5 February 2021 he asserts that:
14. In my personal Westpac bank accounts, I have $684.13 (as at 4 February 2021).
15. I have $11,123 by way of credit card debt (as at 3 February 2021).
16. I am owed $161,311 by T Pty Ltd. I have loaned the company funds for the setup of T Pty Ltd, and for ongoing costs of the business. The source of these funds has been credit card payments for expenses as and when they have been required, as well as payments from the funds I receive by way of spousal maintenance.
l7. The only savings I have are the funds currently held in my solicitor’s trust account. I will tender to the Court M-l a costs notice prepared by my solicitors which sets out the legal costs that I have incurred to date and the costs that it is anticipated I will incur should the matter proceed to a final hearing.
18. The last Financial Statement affirmed by the Wife in the proceedings was affirmed on 5 August 2020 and filed on 6 August 2020. At Part I, the Wife attests to the fact that she has access to assets worth $8,152,398, including funds in the bank of $164,298. At Part K, the Wife attests to having liabilities $3,521,194.
19. Upon the settlement of the sale of the Suburb B Property on 21 December 2021, the Wife received $501,794.15.
The crux of the husband’s claim is twofold. First, he does not have the financial capacity to meet the wife’s costs. Second, there is a significant disparity between the financial circumstances of the parties, such that he ought not be liable to pay the wife’s costs, at least at this stage in the proceedings.
At the time of the interim hearing before me in December 2020, it was common ground between the parties that expert valuations of the parties’ joint assets had not been completed, but would be prepared and released by February or March 2021. The Court is unaware of whether this has occurred, and if so, the outcome as it relates to the asset pool. In any event, and at this juncture of the proceedings, the Court is not in a position to make findings with respect to the parties’ financial positions or the state of the asset pool that exists, absent the critical evidence.
What the Court can glean, however, is that on any case, the wife is in a strong financial position relative to the husband. It is common ground that she controls all of the parties’ income earning assets. She too meets the outgoings and repayments for those assets. She pays spousal maintenance to the husband and has funded his litigation expenses to date, pursuant to the orders of Watts J dated 14 June 2018. In her most recent Financial Statement filed on 6 August 2020, a document in which she attests to the truth of its contents, she estimates that she has approximately $8,152,000 worth of property with liabilities of slightly over $3,500,000. She asserts that she continues to earn an income as a Company Director, derived from the various businesses and entities she controls. On any reading of her Financial Statement, she controls a significant amount of equity.
In contrast, the husband’s Financial Statement filed on 3 July 2020, a document in which he also attests to the truth of its contents, he estimates the same amounts with respect to property owned and liabilities owed. He attests to his sole income source being spousal maintenance payments made to him by the wife, in the sum of $1,976 per week. It must be noted, however, that the husband is far from destitute. He continues to receive spousal maintenance from the wife and has been advanced multiple lump sums of money from the wife since the commencement of these proceedings. Pursuant to my orders, he received $215,054.63 from the sale of the Suburb B Property and of those funds, $113,663.93 remain in his solicitors’ trust account. He also deposes to having been advanced multiple loans from friends and family since the commencement of this litigation.
I accept that the present litigation is likely to continue. This is a concession made by both parties. The parties have already incurred significant costs in pursuing this litigation to date and it is inevitable that further costs will be expended in pursuing this matter to a final hearing. As a result, I accept that the husband finds, and is likely to continue to find, himself in an inferior financial position compared to the wife. This is inevitable until the matter achieves finality. The Court recognises, however, that a party's inability to pay costs is not a bar to a costs order being made if that party's conduct is found to warrant such an order: Cross & Beaumont [2008] FamCAFC 68.
There remains an irreconcilable controversy as to the size of the substantial and complex asset pool. The parties’ entitlements to final relief are not known and they appear to be a significant distance apart in their proposals and in their evidence. The Court lacks the requisite expert evidence as to the asset pool and it is not known when this information will become available. The financial picture is far from complete.
I am not satisfied that the evidence in its present form weighs in favour of the making of a costs order against the husband.
Section 117(2A)(b): Whether the parties are in receipt of legal aid
Neither party has indicated that they have been in receipt of legal aid and therefore s 117(2A)(b) is not relevant to the present proceedings.
Section 117(2A)(c): The conduct of the parties
The wife relies on this section in her submissions, but fails to meaningfully expand on what conduct of the husband she says gives rise to an order for costs. The highest her evidence can be taken, in this respect, is that the husband’s conduct in pursuing the interim application, in circumstances where she says it was “absent fundamental material evidentiary foundation” is conduct that would justify the making of a costs order. She further asserts that an Affidavit filed by him in the substantive proceeding was a “prolix attempt to create an adverse impression of the Wife, while not addressing in his evidence the essential material that had to be proved”. The wife does not otherwise address this section of the Act. It appears that her primary contention is that the ‘conduct’ of the husband that would give rise to the making of a costs order is the bringing and pursuing of an unsuccessful application that was heard before me.
In my view, this argument is weak. The husband’s application, albeit unsuccessful, was one that he was entitled to make. In fact, it was one that was foreshadowed, at least hypothetically, by the orders of Austin J dated 12 August 2020 and in this respect I reproduce Notation A of his Honour’s orders below:
A. Upon sale of the Suburb B property pursuant to Order 3 hereof, the husband will become entitled to 30 percent of the net proceeds of sale and the wife will become entitled to 70 percent of the net proceeds of sale. These Orders do not estop the husband from making an application (made in accordance with the Family Law Rules) for an injunction to restrain the wife’s use of her share of the net proceeds of sale if so inclined or advised.
(emphasis added)
I am not satisfied that the husband has engaged in conduct that would give rise to the making of a costs order against him.
Section 117(2A)(d): Failure to comply with orders of the Court
Neither party raised this as a relevant matter in the present application.
Section 117(2A)(e): Whether a party has been wholly unsuccessful in the proceedings
There is no doubt that the husband’s application was wholly unsuccessful before me. Section 117(2A)(e), on its face, therefore carries some weight in favour of the making of a costs order against him. However, as adverted to earlier, the application made by the husband was one that he was entitled to make. It is my view that in these circumstances, this aspect of the wife’s application carries less weight.
Section 117(2A)(f): Offers of settlement
The husband’s evidence is that he engaged in negotiations with the wife prior to the making of the Application and sought to resolve the matters between them. He has provided a tender bundle to his Affidavit of 5 February 2021, containing a host of correspondence that was sent between the parties. This correspondence evidences that such negotiations did in fact take place and offers of settlement were made. Accordingly, I mark this tender bundle as exhibit R1.
At paragraph 3 of her written submissions, the wife asserts that she “made her position clear that the net proceeds of sale of the Suburb B property should be distributed in accordance with the parties' legal ownership of the property.” She continues on to acknowledge in the same paragraph that “[i]t was clear that the parties were not in agreement as to how the proceeds of sale should be distributed.” It is therefore apparent, from both parties’ evidence, that they were unable to agree as to the distribution of those funds. The wife’s submissions therefore do not turn in her favour. The husband was entitled to make the interim application in circumstances where there were no orders providing for the distribution of those funds, the parties were unable to agree with respect to same, and there had been a genuine attempt at resolution prior to the making of the application.
I am satisfied that offers of settlement were made prior to the initiation of the interim application. I have had regard to those offers. I place some weight on s 117(2A)(f) in the context of this application.
Section 117(2A)(g): Any other relevant matters
At paragraph 23 of his submissions, the husband contends that pursuant to this subsection the Court should have regard to the fees charged by Mr Strum QC who appeared for the wife at the interim hearing. The husband contends that Mr Strum’s fees, in the amount of $19,800, are excessive and unreasonable.
It is not for the Court to undertake an assessment of the reasonableness of rates or fees charged by members of counsel. The wife is entitled to brief counsel, including senior or Queen’s Counsel, to defend any application brought against her, just as the husband is. It is noteworthy that the husband, too, briefed senior counsel to appear on his behalf at the interim hearing. Curiously however, at paragraph 56 of his Affidavit filed 5 February 2021, the husband claims that he was not required to pay counsel for his appearance at the hearing. He states this was due to “some exceptional circumstances”. The husband does not elaborate on these circumstances, but in any event, it remains each party’s right to engage and instruct appropriately qualified members of counsel. I therefore do not consider this to be a relevant matter when determining the costs application before me.
INDEMNITY COSTS
The wife sought that her costs be paid on an indemnity basis.
It is well settled that when costs are ordered by this Court, such costs are payable on a party and party basis. It has been held that the Court should not lightly depart from the ordinary rule: Kohan & Kohan (1993) FLC 92-340.
The provision relating to the calculation of costs is governed by r 19.18(1) of the Family Law Rules 2004 (Cth) (‘Rules’) which is as follows:
19.18 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
The Rule further provides, in subparagraph (3), that:
(3) In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre‑action procedures; and
(f) expenses properly paid or payable.
In relation to an award of indemnity costs, the recent Full Court decision of Phillips & Hansford [2020] FamCAFC 28, helpfully summarises the position as follows:
35. Indemnity cost orders are made only in exceptional cases (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
36. Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
37. In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).
The wife’s submissions do not expand on the circumstances that she says should give rise to an order for indemnity costs in any meaningful way. In any event, if I were to find it appropriate to make an order for costs, it is my view that the circumstances of this case are not of the exceptional kind required to depart from ordinary party to party costs.
CONCLUSION
I am not satisfied that there exists a sufficient basis for a costs order to be made against the husband in circumstances where there is a significant amount of uncertainty concerning his financial position particularly as it pertains to his entitlement to a final property settlement. The Court finds itself with little to no knowledge about the size, value or extent of the parties’ assets absent the required expert evidence. At this stage of the proceedings, it is not clear to what extent, if any, the husband will be entitled to a final property settlement. This is a matter for determination at final hearing. If the husband’s entitlements are as limited as the wife suggests, the husband would benefit from careful consideration of his future conduct in these proceedings, in order to avoid any further reduction in those entitlements.
Whilst the husband’s interim application was entirely unsuccessful, it is an application that he was entitled to make. The evidence does not sustain a finding that he has engaged in any conduct that would warrant the making of a costs order against him at this juncture of the proceedings.
In these circumstances I will reserve the question of whether the husband ought to pay the wife’s costs of and incidental to the Application in a Case filed 3 December 2020 for determination at the conclusion of these proceedings.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli J Associate:
Dated: 14 April 2021
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