Nakahara & Nakahara

Case [2024] FedCFamC1F 875

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Nakahara & Nakahara [2024] FedCFamC1F 875

File number: MLC 12403 of 2021
Judgment of: HARTNETT J
Date of judgment: 19 December 2024
Catchwords: FAMILY LAW – COSTS – Where the wife sought an order for indemnity costs – Where the parties entered into consent orders for property settlement – Where the wife had earlier offered to settle the proceeding in the same terms as that consented to by the husband during the trial – Costs order made against the husband on a party-party basis
Legislation:

Family Law Act 1975 (Cth) s 117

Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68, 190

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 10.26, 12.17

Cases cited:

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Kohan and Kohan (1993) FLC 92-340

Mallet v Mallet (1984) FLC 91-507

Munday v Bowman (1997) FLC 92-784

PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123

Penfold v Penfold (1980) FLC 90-800

Division: Division 1 First Instance
Number of paragraphs: 36
Date of last submissions: 15 October 2024
Date of hearing: 5-6 August 2024
Place: Melbourne
Counsel for the Applicant: Mr Schmidt
Solicitor for the Applicant: Purcell & Purcell
Counsel for the First Respondent: Mr Goussis
Solicitor for the First Respondent: Mirabella Solicitors
Second Respondent: Did not participate
Third Respondent: Did not participate

ORDERS

MLC12403 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS NAKAHARA

Applicant
AND:

MR NAKAHARA

First Respondent

B PTY LTD

Second Respondent

MR C NAKAHARA

Third Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

19 DECEMBER 2024

THE COURT ORDERS THAT:

1.The husband pay the wife’s costs of and incidental to the proceeding as assessed on a party-party basis as and from 4 August 2023 to 6 August 2024 inclusive (except for the costs of the hearing on 6 March 2024).

2.The husband pay the wife’s costs of and incidental to her costs application as assessed on a party-party basis.

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 Nakahara & Nakahara has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

HARTNETT J

INTRODUCTION

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AGLC
Nakahara & Nakahara [2024] FedCFamC1F 875
Case
[2024] FedCFamC1F 875
Decision Date

CaseChat Overview and Summary

In the matter of Nakahara & Nakahara, the wife sought an order for indemnity costs against the husband, who had entered into consent orders for property settlement. The dispute arose during the final hearing which commenced on 5 August 2024, with the consent orders being finalised on 6 August 2024. The wife had previously offered to settle the proceedings in the same terms as those agreed by the husband, but the husband rejected this offer. The wife sought an indemnity costs order against the husband for his conduct throughout the proceedings, arguing that he did not act in accordance with the overarching purpose of the Family Law Act 1975 (Cth).

The court was required to decide whether the husband's conduct warranted an indemnity costs order, or if a party-party costs order was more appropriate. The court considered the financial circumstances of each party, the conduct of the parties, and whether the proceedings were necessitated by a failure to comply with orders. The wife argued that the husband had a vastly superior financial position and had the capacity to meet a costs order. The court found that the wife conducted herself appropriately throughout the proceedings, whereas the husband failed to comply with several orders and caused the wife to incur unnecessary costs.

The court exercised its discretion and found that although the husband's conduct did not warrant an indemnity costs order, a party-party costs order was appropriate. The court ordered that the husband pay the wife's costs of and incidental to the proceedings as assessed on a party-party basis from 4 August 2023 to 6 August 2024, excluding the costs of the hearing on 6 March 2024. Additionally, the husband was ordered to pay the wife's costs of and incidental to her costs application as assessed on a party-party basis.

In conclusion, the court found that the husband's conduct did not warrant an indemnity costs order, but a party-party costs order was appropriate given the circumstances. The court ordered the husband to pay the wife's costs of and incidental to the proceedings and her costs application on a party-party basis.

Orders

Orders of the court

MLC12403 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS NAKAHARA

Applicant

AND:

MR NAKAHARA

First Respondent

B PTY LTD

Second Respondent

MR C NAKAHARA

Third Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

19 DECEMBER 2024

THE COURT ORDERS THAT:

1. The husband pay the wife’s costs of and incidental to the proceeding as assessed on a party-party basis as and from 4 August 2023 to 6 August 2024 inclusive (except for the costs of the hearing on 6 March 2024).

2. The husband pay the wife’s costs of and incidental to her costs application as assessed on a party-party basis.

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.

Background

Background to the litigation

Both parties sought to rely upon their written submissions filed (the wife on 6 September 2024 including annexures; the husband on 26 September 2024; and the wife’s submissions in reply on 15 October 2024) in the wife’s costs application. BRIEF BACKGROUND On 5 August 2024, the final hearing commenced. On 6 August 2024, final property orders (“the final orders”) were made by consent as follows: THE COURT ORDERS, BY CONSENT, THAT:1.[Mr C Nakahara] be, and is hereby, joined to these proceedings as Third Respondent.2.All extant orders be, and are hereby, discharged.3.The Second Respondent, in its capacity as trustee of the [Nakahara Family Trust] (“Trust”), do all such acts, and execute all such documents, as are required to sell (“Sale”) the property located at [D Street, Suburb E] in the state of Victoria (“[D Street]”) and, in relation to the Sale:3.1first, the Second Respondent do all such acts, and execute all such documents, to complete the contract of sale entered into between the Second Respondent and [F Pty Ltd ATF G Trust] dated [mid] 2024 (“Tenant Sale”);3.2 secondly, if the Tenant Sale fails:3.2.1[D Street] be listed for sale within 14 days of the Tenant Sale failing;3.2.2the Second Respondent engage such selling agent as is resolved by the Second Respondent’s directors and, failing such resolution, as nominated by the president for the time being of the Real Estate Institute of Victoria;3.2.3[D Street] be sold by private treaty, or such other method of sale as resolved by the Second Respondent’s directors;3.2.4the reserve sale price be $2,400,000, unless otherwise agreed resolved by the Second Respondent’s directors,and, in any event:3.3the parties jointly instruct and provide a copy of these orders to [H Lawyers] (“Conveyancing Solicitor”) to have conduct of the conveyance of the Sale;3.4the Second Respondent do all such acts, and sign all such documents, as are required to procure the consent of the buyer for the early release of each deposit paid and, within 2 business days of any release to the Second Respondent of any deposit (or any part thereof), the Second Respondent disburse an equivalent amount to the wife by way of advance of the payment to be made pursuant to order 6.2.2;3.5upon settlement of the Sale (“Settlement”), the proceeds thereof be disbursed as follows:3.5.1first, in payment of advertising expenses, agent’s commission and the reasonable costs of sale;3.5.2 secondly, in adjustment of rates and taxes;3.5.3 thirdly, in payment of the reasonable costs of the conveyance;3.5.4fourthly, the balance (“Net Proceeds”) be paid to the trust account of the Wife’s solicitors on behalf of the Second Respondent (“Trust Funds”), to be administered pursuant to orders 6 to 9 inclusive.4.Each party have liberty to provide to the Conveyancing Solicitor a copy of these Orders.5.No later than 21 days prior to the Settlement, the Wife and the Husband jointly, and at their equal shared expense, engage [Mr J] of [K Financial Services] to:5.1advise as to the most tax-effective manner in which to distribute the Net Proceeds as between the Wife and the Husband, taking into account the capital gain arising from the Sale (“Distribution Advice”); and 5.2 on the basis of the distributions advised in the preceding subparagraph, provide to the parties written estimates of:5.2.1the income tax to be assessed against the Wife referable to the capital gain arising from the Sale (“Wife’s CGT Estimate”);5.2.2the income tax to be assessed against the Husband’s referable to the capital gain arising from the Sale (“Husband’s CGT Estimate”).6.No later than 7 days after receipt by the parties of the Distribution Advice, the Wife’s CGT Estimate, and the Husband’s CGT Estimate:6.1the Second Respondent do all such acts, and execute all such documents, as are required to record distribution of the Net Proceeds in accordance with the taxation advice by [K Financial Services] (“Paper Distribution”);6.2 the Wife’s solicitors pay from the Trust Funds:6.2.1an amount equal to sum of the Wife’s CGT Estimate and the Husband’s CGT Estimate into a controlled monies account in the name of the Second Respondent (“CGT Funds”), not to be dealt with save as provided for in these Orders; and6.2.2the balance to the Wife.7.Within 7 days of the Wife receiving her income taxation assessment for the financial year in which the Paper Distribution is recorded, she forward to each of her solicitors and the Husband’s solicitors a copy of that assessment, and within a further 7 days, the Wife’s solicitors disburse to the Wife from the CGT Funds a sum equal to the proportion the Wife’s taxation attributable to the capital gain referable to the Sale and the Paper Distribution (“Wife CGT Reimbursement”).8.Within 7 days of the Husband receiving his income taxation assessment for the financial year in which the Paper Distribution is recorded, he forward to each of his solicitors and the Wife’s solicitors a copy of that assessment, and upon the later of:8.1 a further 7 days; or 8.2 the day after the Wife’s CGT Reimbursement,(whichever occurs later), the Wife’s solicitors disburse to the Husband from the CGT Funds a sum equal to the proportion the Husband’s taxation attributable to the capital gain referable to the Sale and the Paper Distribution (“Husband’s CGT Reimbursement”).9.Within 7 days after the Husband’s CGT Reimbursement, the Wife’s solicitors disburse any remaining balance of the CGT Funds as to 50% to the Wife and 50% to the Husband.10.Within 2 business days of the date of these Orders, each of the Wife and the Husband do all such acts, and sign all such documents, as are required to transfer to the Wife all funds standing to the Wife’s and Husband’s joint credit in:10.1 NAB personal account with number ending …90;10.2NAB term deposit account with number ending …42; and 10.3 NAB term deposit account with number ending …17.11. Simultaneously with the Settlement, the Husband:11.1pay, or cause to be paid on his behalf, to the Wife such amount as is required to give effect to an overall equal division of all property (including superannuation) (“Payment”), to be calculated taking into account:11.1.1the partial distribution to the Wife from the Net Proceeds pursuant to order 6.2.2;11.1.2that that the husband will otherwise receive or retain property to the agreed net value of $3,259,295; and 11.1.3 that the Wife will otherwise receive or retain property to the agreed net value of $246,583;11.2at his expense, do all such acts, and sign all such documents, as are required to indemnify the Wife, and keep her effectively indemnified, against, and pay, all liability of, and in relation to, the Husband, and each of the Second Respondent, the Trust, and [L Pty Ltd] […] (“Husband’s Entities”), including all liability personally guaranteed by the Wife, and including all unpaid taxation assessed, or hereafter assessed, against the Wife in relation to the Husband’s Entities, and from all interest, penalties, costs, fines, claims, demands, proceedings thereof, and in relation thereto;11.3at his expense, do all such acts, and sign all such documents, as are required to indemnify the Third Respondent, and keep him effectively indemnified, against, and pay, all liability of, and in relation to, the Husband, and each of the Husband’s Entities, including all liability personally guaranteed by the Third Respondent, and including all unpaid taxation assessed, or hereafter assessed, against the Third Respondent in relation to the Husband’s Entities, and from all interest, penalties, costs, fines, claims, demands, proceedings thereof, and in relation thereto;11.4at the Second Respondent’s expense, cause the financial accounts and income tax return for the Second Respondent and the [Nakahara Family Trust] for the financial years ended 30 June 2024 and 2025 to be completed and lodged; and 11.5 do all such acts, and sign all such documents, as are reasonably required to enable the Wife to comply with her obligations pursuant to Order 12.12.Simultaneously with the later of the Husband’s compliance with his obligations pursuant to Order 11 and the completion of the Settlement, the Wife:12.1do all such acts, and sign all such documents, as are required to transfer to the Husband, at the Husband’s sole expense, her interest in the property located at [M Street, Suburb N] in the state of Victoria (“[M Street]”);12.2at the Husband’s expense, do all such acts, and sign all such documents, as are required to:12.2.1resign from any position which she may hold in the Husband’s Entities (including, but not limited to, directorships of corporations and appointorships and guardianships of trusts);12.2.2transfer her shares (if any) in the companies forming part of the Husband’s Entities to the Husband;12.2.3 renounce all claim against the Husband’s Entities;12.2.4renounce all claim against the Husband with respect to the Husband’s Entities, including unpaid beneficiary entitlements, save as provided for at order 11.2;12.2.5cause any entitlement or entitlements she has in the Husband’s Entities to vest in the Husband;12.2.6assign to the Husband any credit loan account she may have in the Husband’s Entities; and 912.2.7consent to her removal as a beneficiary of the Husband’s Entities; and 12.3 do all such acts, and sign all such documents, as are reasonably required to enable the Husband to comply with the Husband’s Obligations.13.Simultaneously with the later of the Husband’s compliance with his obligations pursuant to order 11 and the completion of the Settlement, the Third Respondent:13.1at the Husband’s expense, do all such acts, and sign all such documents, as are required to:13.1.1resign from any position which he may hold in the Husband’s Entities (including, but not limited to, directorships of corporations and appointorships and guardianships of trusts);13.1.2transfer his shares (if any) in the companies forming part of the Husband’s Entities to the Husband;13.1.3 renounce all claim against the Husband’s Entities;13.1.4renounce all claim against the Husband with respect to the Husband’s Entities, including unpaid beneficiary entitlements, save as provided for at order 11.2;13.1.5cause any entitlement or entitlements he has in the Husband’s Entities to vest in the Husband;13.1.6assign to the Husband any credit loan account he may have in the Husband’s Entities; and 1013.1.7consent to his removal as a beneficiary of the Husband’s Entities; and 13.2do all such acts, and sign all such documents, as are reasonably required to enable the Husband to comply with the Husband’s Obligations.14. Pending the Settlement:14.1the Second Respondent do all such acts, and execute all such documents, as are required to distribute, and pay, to the wife, all rental income received by it;14.2the Second Respondent be, and is hereby, restrained from encumbering the [D Street] without the express written consent of the Wife and the Husband; and 14.3 the Wife be, and is hereby, restrained from encumbering [M Street] without the express written consent of the Husband.15.If the Husband fails to make the Payment (or any part thereof) simultaneously with the Settlement:15.1the Husband, until the Payment is made in full, pay, or cause to be paid, to the Wife interest on the Payment, or such part thereof as shall remain outstanding, at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 as shall prevail from time to time, such interest to be paid in arrears, the first interest payment to be made 1 month after the Settlement, subsequent payments to be made monthly thereafter, and the final payment to be made upon the day on which the obligation to pay interest ceases;15.2the Husband, within 14 days of the Settlement, vacate [M Street];15.3the Wife do all such acts, and sign all such documents, as are required to sell [M Street] (“Default Sale”) and, in relation to the Default Sale:15.3.1[M Street] be listed for sale within 14 days after the date of the Settlement;15.3.2the Wife engage such selling agent as is agreed between the Wife and the Husband and, failing agreement, as nominated by the president for the time being of the Real Estate Institute of Victoria;15.3.3 [M Street] be sold by way of a no-reserve public auction;15.3.4the parties instruct the Conveyancing Solicitor to have conduct of the conveyance of the Default Sale;15.3.5upon settlement of the sale, the proceeds thereof be disbursed as follows:15.3.5.1first, in payment of advertising expenses, agent’s commission and the reasonable costs of sale;15.3.5.2 secondly, in adjustment of rates and taxes;15.3.5.3thirdly, in payment of the reasonable costs of the conveyance;15.3.5.4fourthly, in payment to the Wife of any outstanding with respect to the Payment, and interest pursuant to order 15.1; and 15.3.5.5 the balance to the Husband.16.Unless otherwise specified in these Orders, and save for the purpose of enforcement and the wife’s costs application:16.1each of the Wife and the Husband be solely entitled, to the exclusion of the other, to all property (including choses in action) in the possession of such party at the date of these Orders and, without limiting the generality thereof:16.1.1 the Wife retain:16.1.1.1the funds standing to her credit in bank accounts; and 16.1.1.2the chattels in her possession as at the date of these Orders; and 16.1.2 the Husband retain:16.1.2.1 his [Motor Vehicle 1];16.1.2.2 his interests in the Husband’s Entities;16.1.2.3the funds standing to his credit in bank accounts;16.1.2.4the chattels in his possession as at the date of these Orders; and 16.1.2.5 his superannuation interests;16.2the Husband and Wife each forego any claims they each have to any superannuation, long service leave, redundancy, retirement, retrenchment, and like benefits, belonging to, or earned by, the other;16.3 insurance policies remain the sole property of the named owner;16.4any joint tenancy between the parties in any property whatsoever be, and is hereby, severed; and 16.5each party be solely liable for, and indemnify the others against, any liability:16.5.1encumbering any items of property to which that first party is entitled pursuant to these Orders; and/or 16.5.2in that party’s sole name, including, but not limited to, credit cards, loans, lease agreements and charitable commitments.17.If, within 7 days of a written request to do so, either party fails, refuses, or neglects, to sign, execute, and/or return, a document required to be signed by them to give effect to these Orders, then a registrar of the Melbourne Registry of this Honourable Court is hereby appointed pursuant to s 106A of the Family Law Act 1975 (“Act”) to sign, or execute, such document on behalf of the defaulting party.18. On or before 6 September 2024, the wife file and serve:18.1 written submissions in relation to her application for costs; and18.2 any affidavit in support of such application.19. On or before 27 September 2024, the husband file and serve:19.1 written submissions in response; and 19.2 any affidavit in support of such submissions.20.On or before 18 October 2024, the wife file and serve written submissions in reply.AND THE COURT NOTES THATA.The parties intend that these Orders shall, in accordance with section 81 of the Family Law Act 1975 (Cth), as far as practicable, finally determine the financial relationships between them, and avoid further proceedings between them, save as to the Wife’s costs application.B.The parties acknowledge that, pending completion of these Orders, they hold their respective interests in the property dealt with in these Orders upon trust, pursuant to these Orders, for each other in such proportions as accord with their entitlements under these Orders.C.The Wife offered this day to resolve her costs application on the basis that the husband pay $80,000 in full and final resolution of that application, but the husband rejected that offer.D.The Wife intends to seek that the husband pay her costs of, and incidental to, these proceedings (in both this Court and the Federal Circuit and Family Court of Australia (Division 2)), including (but not limited to) from 13 May 2023 to the conclusion of the proceedings (including her costs of her costs application) on an indemnity basis.…LEGAL PRINCIPLES

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Otherwise, in respect of this offer, there was no evidentiary basis for the husband’s submission in paragraph 38 of his submissions and, accordingly, the further submissions made in respect of it are misconceived as submitted by the wife’s counsel. Even if I am wrong about that, it does not impact my determination to exercise my discretion in the wife’s favour for the totality of the reasons as set out in this judgment.CONCLUSION At the least, by 4 August 2023, the husband had before him a written offer of settlement from the wife which substantially reflected the terms of the final orders. His conduct throughout the proceeding did not accord with the overarching purpose as set out in ss 67 and 190 of the FCFCOA Act. The husband failed in his pursuit of his add-back claim, and he caused the wife the incurring of unnecessary costs. In the exercise of my discretion, I do not consider this a circumstance of an exceptional kind whereby there should be an award of indemnity costs. But there should certainly be an award of party-party costs in favour of the wife and from 4 August 2023 (except for the costs of the hearing on 6 March 2024). I shall so order.

Ratio Decidendi

Legal Principle Established

Although the Court has the power to order a specific amount for costs,[4] which is generally the preferred approach, in the circumstances of the quantum of costs claimed in this matter, I consider that the method of calculating costs that is most appropriate, if a costs order is to be made, is by way of an assessment of those costs over whatever period the Court determines is the relevant period.CONSIDERATION[4] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17(1)(a).Section 117(2A)(a) financial circumstances of each of the parties As submitted by counsel for the wife, pending the disbursement to the wife of the net proceeds of sale of D Street in the State of Victoria (Order 6.2.2) and the contemporaneous payment to her by the husband (Order 11.1), the husband enjoys a vastly superior financial position to the wife. According to the agreed balance sheet, the husband enjoys control of, and access to, cash at bank of more than $300,000 and superannuation (which, at his age, can be withdrawn) of more than $243,000 while at the same time residing in the unencumbered former matrimonial home at M Street. He clearly has the capacity to meet a costs order as sought by the wife from his available liquid assets. Following the implementation of the final orders, there will be an equal allocation of the assets, including superannuation entitlements, and liabilities of the parties. Each of the parties will and have been required to meet their legal costs as a personal liability with neither party being in receipt of legal aid.Section 117(2A)(c) conduct of the parties and section 117(2A)(d) whether proceedings necessitated by a failure to comply with orders I find that the wife conducted herself appropriately throughout the proceeding. She complied with orders as made by the Court and complied with her obligations pursuant to the Rules. The husband’s submissions that the wife did not so act were not supported by the evidence before the Court, and nor was there evidence that the subpoenas issued on behalf of the husband were consequent to any failure by the wife to provide disclosure. I find the husband throughout the proceeding did not conduct himself in accordance with varying obligations imposed upon him, the husband failing to comply with orders, including:(1)the filing of an Amended Response by 27 November 2023 pursuant to Order 2(a) of the Orders made 2 August 2023, the effect of which was that the wife had no knowledge of the precise case being pursued by the husband although I observe that she did know what he said was the ambit of the dispute; and (2)filing late his evidence for trial in the Federal Circuit and Family Court of Australia (Division 2) (which was due to commence on 12 March 2024) and not in accordance with Orders 19 and 20 of Orders made 7 December 2023, as a direct consequence of which: that trial was vacated; the costs of the wife’s solicitors and counsel preparing for the vacated trial were thrown away; and the wife was compelled to incur the solicitor client costs of a mention on 6 March 2024, in relation to which an order for costs was made against the husband fixed in the amount of $2,500.00 pursuant to r 12.17 of the Rules, and a second compliance and readiness hearing on 5 April 2024. Significant respective costs as incurred by the wife over these events were thrown away.