Nakahara & Nakahara
[2024] FedCFamC1F 875
•19 December 2024
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
The discrete issue for the Court to determine is whether the application for costs of the applicant wife (“the wife”) as against the respondent husband (“the husband”) following the making of final property orders by consent should succeed. If costs orders are made, the issues which follow are on what basis the orders should be made, namely on an indemnity or party-party basis, and in what method of calculation. Should the Court determine to fix a specific amount for costs; or should costs be assessed, both approaches being open to the Court pursuant to r 12.17 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
The wife sought that the husband pay her costs of and incidental to:
(1)the proceeding from initiation (upon the wife filing her Initiating Application on 10 November 2021) to 12 May 2023, fixed in the sum of $26,149.66;
(2)the proceeding from 13 May 2023 to 6 August 2024 inclusive (except for the costs of the hearing on 6 March 2024) on an indemnity basis in the sum of $104,168.78 or, in the alternative, fixed in a sum of at least $73,755.79 or, in the further alternative, as assessed on a party-party basis; and
(3)her discrete costs application on an indemnity basis fixed in the sum of $7,722.00 or, in the alternative, fixed in the sum of at least $6,027.66 or, in the further alternative, as assessed on a party-party basis.
The wife foreshadowed her making of a costs application in the notations to the final property orders made 6 August 2024.
The husband opposed the making of any costs order.
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; and
6.2.2the 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 9
12.2.7consent 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 10
13.1.7consent 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; and
18.2 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 THAT
A.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
Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) sets out the general rule that each party shall bear their own costs.
However, the Court, being satisfied that there are circumstances justifying it in doing so, has power pursuant to s 117(2) of the Act to make an order for costs in the exercise of the Court’s discretion.
In considering what (if any) order for costs should be made, the Court shall have regard, relevantly, to the matters in s 117(2A) of the Act which are as follows:
(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 must have regard to all the matters in s 117(2A) of the Act, each matter’s particular relevance will depend upon the circumstances of the case. The matters are not to be read in a restrictive way and the discretion afforded to the Court is a broad one.[1]
[1] Penfold v Penfold (1980) FLC 90-800 at pp.75,053 – 75,054, quoted in Mallet v Mallet (1984) FLC 91-507 at pp 79,123 – 79, 124.
No one factor in s 117(2A) is determinative, and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 at [130], the Full Court observed:
41.… Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
There is an additional mandatory requirement created by s 68(4) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) which requires the Court to take into account any failure to comply with the duty imposed by ss 68(1) or (2), which require the parties and the lawyers for the parties to conduct the proceedings in a way that is consistent with the overarching purpose of the family law practice and procedures provisions of the FCFCOA Act. The overarching purpose is set out in s 67 and requires, among other things, for the proceedings to be conducted as “quickly, inexpensively and efficiently as possible”. The objectives of the overarching purpose include “the efficient use of the judicial and administrative resources”, “the efficient disposal of the Court’s overall caseload”, “the disposal of all proceedings in a timely manner” and “the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute”.
When considering the making of an indemnity costs orders as opposed to a party/party costs order, the principles as stated by Sheppard J in Colgate-Palmolive Co and Anor v Cussons Pty Ltd (1993) 46 FCR 225 at 256 are, relevantly, in the following terms:
…
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of Order 62, rules 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia…
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson, Maitland Hospital v. Fisher (No. 2), Crisp v. Keng and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
(Citations omitted)
Following a consideration of Colgate-Palmolive Co and Anor v Cussons Pty Ltd (1993) 46 FCR 225, the Full Court of the Family Court in Munday v Bowman (1997) FLC 92-784 assisted trial judges by extracting some examples of circumstances which would warrant the exercise of the discretion in s 117(2A) toward an award of indemnity costs being:
(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 circumstances the action must be presumed to have been commenced and continued for some ulterior motive or because of some wilful disregard of the known facts.
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.
(c) Evidence of misconduct causing loss of time to the court and to other parties.
(d) The making of allegations which ought never have been made or undue prolongation of a case by groundless contentions.
(e) An imprudent refusal of an offer to compromise.[2]
[2] Munday v Bowman (1997) FLC 92-784.
The category of cases in which a Court may make an indemnity costs order is, however, not limited to those identified above although it remains limited by the fact that the Court will not lightly make an order for costs to be paid on an indemnity basis. There must be some circumstance of an exceptional kind to justify that course.[3]
[3] Kohan and Kohan (1993) FLC 92-340 at 79,614.
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.
Each of those failures as set out above also constituted a default pursuant to paragraphs (c) and (d) of subrule 10.26(2) of the Rules.
Further, the husband failed to particularise his add-back claim as referred to hereafter, or to provide any evidence in support of it, until he late filed his trial affidavit on 20 February 2024, by which time the proceeding had been on foot for over two years and three months in circumstances where the evidence relied upon by the husband consisted of photographs of cheque butts which had been in the husband’s possession throughout the proceeding but not disclosed from the outset. Those documents did not support the add-back claim and nor did the cross-examination of the wife at trial.
Section 117(2A)(e) whether any party has been wholly unsuccessful
The wife’s formal position before the Court was set out in her Amended Initiating Application filed on 27 November 2023. That position was however known to the husband for a considerable period prior thereto as is described hereafter. By reference to the wife’s stated earlier and constant position, the husband has been wholly unsuccessful.
The husband’s pursuit of an add-back claim against the wife to include notional assets as appearing on the wife’s side of the ledger, and being as claimed by the husband hidden assets of the wife which she failed to disclose throughout the proceeding such that, if successful, the outcome of the proceeding would have been a considerable adjustment, over $600,000, in his favour, was wholly unsuccessful. It was not a matter in dispute that this kept alive the litigation between the parties. It was recorded in Notation D to the consent orders made on 5 April 2024 which is as follows:
D.Save for the Husband’s Add-back Allegations and any add-backs with respect to each party’s legal fees, the parties agree:
a. on the composition and value of the property available for adjustment between them, in terms of the joint balance sheet annexed hereto (which was sent to the Associate to Judge O’Sullivan on 5 March 2024 by Mr Schmidt and Mr Goussis jointly); and
b. that there ought to be an equal division of the property available for adjustment (which was confirmed in open Court by Mr Goussis on 12 March 2024).
Ultimately, the husband resiled from the pursuit of his add-back claim on the second day of the trial, accepting what had been the wife’s case since May 2023.
Section 117(2A)(f) offers of settlement
The wife made multiple written offers to settle the proceeding by way of an equal division of the parties’ existing property interests, being the undisputed outcome contained in the final property orders of 6 August 2024.
It could not be said, however, that her 17 March 2021 offer, as set out in a letter from her solicitors to the husband personally, the husband not being represented at the time, and prior to any litigation having commenced, did any more than indicate that the wife was willing to consider resolution of their property dispute by way of a ‘50/50 division’. That correspondence nevertheless conveyed to the husband the wife’s openness to an approach of equality between them. At that stage however, the process of discovery had not been addressed and the asset pool as then described was not the same as the trial balance sheet.
At the mediation attended between the parties on 12 May 2023, the wife offered to enter into a detailed minute of consent orders in substantially the same terms as the final orders, a fact conceded by the husband. Following discussions between counsel, the wife offered to enter into a Heads of Agreement dated 12 May 2023 (“the Heads of Agreement”) which reflected the wife’s proposed minute in more general terms. The parties ultimately signed the Heads of Agreement having each been represented and advised by competent counsel and with the husband having also his solicitor present. The Heads of Agreement substantially reflected the terms of the final orders. The husband had attended the mediation prepared to argue his add-back claim by way of notional assets to the wife. The Court can infer that he was advised by counsel that his add-back claim had no or some limited prospect of success but coupled with that inference is also a further inference that matters of commercial pragmatism and costs avoided may have been prevalent.
The balance sheet annexed to the Heads of Agreement was identical to the agreed balance sheet at trial, save for changes in bank balances and the value of the former matrimonial home (the latter in accordance with an updated single expert report). The reserve price for the sale of D Street in the offer was equal to the then current single expert valuation. The reserve price for the sale of D Street Suburb E in the final orders was equal to the then current single expert valuation.
The wife placed no time limit on the Heads of Agreement and remained open to resolving the parties’ dispute in its terms indefinitely. The husband represented to the wife and the Court, through his solicitors and in notations to orders until at least the 2 August 2023, that he intended to implement the Heads of Agreement. He subsequently reneged on his agreement.
4 August 2023 Offer
In a letter from her solicitors to the husband’s solicitors dated 4 August 2023, the wife offered to enter into a minute of consent orders which substantially reflected the terms of the final orders. The husband concedes as much. The husband submitted, however, that he was entitled to have the wife’s evidence tested in cross-examination. Whilst he may have been, he had before him an acceptable offer of settlement in written form which he did not improve upon. Which he did not accept.
I observe that each of the final orders; the Heads of Agreement; and the 4 August 2023 offer included a reserve price for the sale of D Street equivalent to the single expert valuation of the property current at the relevant time.
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.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hartnett.
Associate:
Dated: 19 December 2024
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