Palma & Caleffi and Anor (Security for Costs)
[2011] FamCAFC 174
•25 August 2011
FAMILY COURT OF AUSTRALIA
| PALMA & CALEFFI AND ANOR (SECURITY FOR COSTS) | [2011] FamCAFC 174 |
| FAMILY LAW – APPLICATION IN AN APPEAL – SECURITY FOR COSTS – where the respondents are appealing against property settlement and costs orders – where the applicant filed an application seeking security for her costs in the appeal – where the respondents are executrices of the late husband’s estate – where the applicant seeks security for costs against the respondents not only as executrices, but also personally – there are no circumstances which justify an order for security either against the estate or the respondents in their personal capacity – application dismissed – the applicant to pay the respondents’ costs of and incidental to the application |
| Family Law Act 1975 (Cth) Judiciary Act 1903 (Cth) |
| Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116 Halsbury and Halsbury [2008] FamCAFC 170 Jones and Jones (2001) FLC 93-080 Knowles & Green [2010] FamCAFC 31 Lathwell v Lathwell [2008] WASCA 256 Luadaka v Luadaka (1998) FLC 92-830 Sawer & Sawer [2007] FamCA 140 Vasiljev v Public Trustee [1974] 2 NSWLR 497 |
| APPLICANT: | Ms Palma |
| FIRST RESPONDENT: | Ms Caleffi |
| SECOND RESPONDENT: | Ms Falco |
| FILE NUMBER: | NCC | 737 | of | 2007 |
| APPEAL NUMBER: | EA | 138 | of | 2010 |
| DATE DELIVERED: | 25 August 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Coleman, Thackray and Strickland JJ |
| HEARING DATE: | 22 August 2011 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 24 September 2010 |
| LOWER COURT MNC: | [2010] FMCAfam 1023 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Livingstone |
| SOLICITOR FOR THE APPLICANT: | Marsden's Law Group |
| COUNSEL FOR THE RESPONDENTS: | Ms Winfield |
| SOLICITOR FOR THE RESPONDENTS: | Paul Gowran & Co |
Orders
The application in an appeal be dismissed.
The applicant pay the respondents’ costs of and incidental to the application fixed in the sum of $4000, such costs to be offset against the costs awarded in favour of the applicant against the respondents on 3 November 2010.
Execution on the order for costs in Order 2 be stayed pending finalisation of the appeal in proceedings EA 138/2010.
IT IS NOTED that publication of this judgment under the pseudonym Palma & Caleffi and Anor (Security for costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 138 of 2010
File Number: NCC 737 of 2007
| Ms Palma |
Applicant
And
| Ms Caleffi |
First Respondent
And
| Ms Falco |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is the wife’s application filed on 20 July 2011 in which she seeks that the respondents provide $15,000 by way of security for her costs in the appeal which the respondents have filed against property settlement and costs orders made by Federal Magistrate Coates. The wife also seeks an order that the appeal be dismissed if the sum ordered is not paid within 28 days.
The respondents are two of the adult children of the wife and her late husband. They are the executrices of the husband’s estate, and were substituted for the husband in the property settlement proceedings following his death.
The order for security is sought against the respondents not only as executrices, but also personally. The respondents seek that the application be dismissed with costs.
Background
The wife, who is now aged 85 years, commenced proceedings for property settlement against her husband in March 2007.
The husband died in May 2008, leaving a will nominating the respondents as the executrices of his estate. On 8 December 2008 an order was made that the respondents be substituted for the husband in the property settlement proceedings.
The principal assets of the parties comprise the jointly owned former matrimonial home in New South Wales and real estate in Italy. The home in New South Wales was found to be worth $350,000. The major piece of real estate in Italy, found to be worth $255,096, was held in the husband’s name. The husband also owned other land in Italy, found to be worth $7,394. The remaining real estate in Italy, found to be worth $13,260, was owned by the wife (to the extent of a 2/9th interest).
The Federal Magistrate made final orders on 24 September 2010. These directed the respondents to transfer to the wife any interest they may have in the former matrimonial home, and to pay her $49,227 by 31 January 2011. The orders required the wife to sign “all documents required under Italian law” to “forgo” any interest she had in the real estate in Italy held in the husband’s name. The orders also required the wife to transfer her interest in the real estate in Italy to the husband’s estate (or as the respondents directed).
The respondents lodged a Notice of Appeal against these orders on 21 October 2010. Their application for a stay was dismissed, with costs, on 3 November 2010.
On 21 January 2011 the Federal Magistrate dealt with costs issues arising from the substantive proceedings. The respondents consented to an order that they reimburse the wife the sum of $6,584.62 in respect of the valuer’s fees. The respondents were otherwise ordered to pay the wife’s costs in the sum of $32,339. Both amounts were payable by 21 April 2011.
The respondents have not complied with the costs orders, nor have they paid the sum of $49,227. They have, however, filed an Amended Notice of Appeal challenging the costs orders (other than the costs order relating to the stay).
Standard directions for preparation of the appeal for hearing were made on 21 December 2010. The Appeal Books were filed within the prescribed time. The respondents’ summary of argument and list of authorities were filed on time on 31 March 2011. The wife’s summary of argument and list of authorities were filed on 29 April 2011.
The wife did not file her application for security for costs until 20 July 2011. We heard oral argument on that application on 22 August 2011. During the course of the hearing, at our urging, the parties consented to an order for the appeal to be expedited, which was proper given that one party to the marriage has already died and the other is 85 years of age. The order for expedition will hopefully ensure the matter is heard in the October 2011 Full Court sittings.
Relevant principles
The principles governing an application for security for costs of an appeal were summarised in Sawer & Sawer [2007] FamCA 140 (“Sawer & Sawer”) where the Full Court said:
19. The power in this Court to make an order for security for costs is to be found in s 117(2) of the [Family Law Act 1975 (Cth) (“the Act”)], which is in the following terms:
If, in proceedings under this Act, the court is of [the] opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
20. The provisions of s 117(2A) are as follows (- s 117(4) and (5) are not presently relevant):
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.
21. The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:
a) the prospect of success of the litigation;
b) whether the claim for security is made bona fide;
c)whether or not an order for security would stifle the litigation;
d)whether or not the litigation may involve a matter of public importance;
e) whether or not there has been a delay in bringing the application for security;
f) whether there would be difficulty in enforcing an order for costs.
(Luadaka v Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)
The matters of potential relevance referred to by the Full Court in Sawer & Sawer at [21] largely mirror Rule 19.05(2) of the Family Law Rules 2004 (“the Rules”).
In determining applications for security for costs, we also consider it important to bear in mind the following observations made by the Full Court in Halsbury and Halsbury [2008] FamCAFC 170 (emphasis in the original):
34. Before concluding we take the opportunity to make the following observations regarding applications for security in relation to the costs of an appeal. Such applications appear increasingly to be taking up the time and resources of the litigants and of the Court. The proper place of such applications and the competing rights that lie at the heart of such applications need to be borne in mind by those seeking them.
35. Appeals are a part of our system of law. They operate as part of the proper checks and balances on the actions and decisions of trial judges. Litigants have a right to appeal in circumstances where they, properly and bona fide, allege error on the part of the trial judge (subject of course to the requirements in certain circumstances of leave to appeal being granted). That right to appeal is an important part of our system of law. It should not be fettered except for good reason.
36. The remedy for those who have a basic right to enjoy the fruits of their judgment and who have that right disturbed by an appeal which is ultimately held to be unmeritorious, is to receive confirmation of the right by the dismissal of the appeal, and, frequently, to have their costs met by the unsuccessful appellant. Although it needs to be recognised in this jurisdiction that s 117 of the Act has the potential to impact on the latter part of that remedy.
37. As we earlier indicated, in the present case both parties put before us relatively detailed arguments in support of, and in opposition to, each ground of appeal. Furthermore, in the present case the wife had already demonstrated her bona fides, by having prepared and filed the appeal books on 7 November 2007. Thus the appeal could well have been heard in the Full Court sittings in which the application for security was heard.
38. Indeed, in our view, and with great respect to the husband and those advising him, the hearing before us of the security application at which it should be noted the husband was able to be legally represented, would have been better devoted to the hearing of the appeal itself.
39. It is also important to stress (but without in any way reflecting on the conduct or intentions of those involved in the present case) that applications for security for costs should not be regarded as a method of funding a respondent’s costs of legal representation in an appeal. This consideration should particularly be borne in mind in this jurisdiction where the fundamental rule regarding costs is that contained in s 117(1) of the Act, being that each party pays his or her own costs.
Matters relied on by the wife in support of her application for security
The wife’s argument in support of her application for security rests on the assumption that the appeal lacks merit and will be dismissed with costs, which the respondents are unlikely to pay, given their conduct to date.
We propose to discuss the wife’s case by reference to the list of potentially relevant factors summarised in Sawer& Sawer at [21]. In doing so, we will touch on the matters in s 117(2A) of the Act to the extent relevant.
The prospect of success of the appeal
The matters raised by the appeal are of some complexity. They raise issues not only concerning the jurisdiction of the Court when dealing with property outside of Australia (admittedly not a novel matter), but also the intersection between Australian matrimonial property law and the law of succession in Italy.
It would be inappropriate for us to conduct a detailed examination of the merits of each of the grounds of appeal. It is sufficient to say that, having read the summaries of argument, although we have concerns about the prospects of success of many of the grounds of appeal, we are not persuaded that all of the grounds demonstrably lack merit. This is not to say that we consider that the appeal has good prospects of success, but rather that it is not possible for us to say with any certainty that all of the grounds will fail.
The bona fides of the parties
The wife appears to call into doubt the bona fides of the respondents. She complained in her affidavit that the respondents “indicated in the trial that they were seeking the Australian property at trial for no other reason except that it was the wishes of their late father”. We do not consider that fact indicates any lack of bona fides on the part of the respondents in seeking to challenge the orders, which go beyond allowing the wife to keep all of the Australian property. The respondents are the executrices of their father’s estate. There are other beneficiaries, apart from them. The respondents have a duty, as the “defender of the will”, to protect their interests: Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503.
The bona fides of the respondents have otherwise been demonstrated by the fact that the appeal was instituted in a timely manner and by the diligent manner in which it has been prosecuted.
Save possibly for the delay, we have no reason to doubt that the wife also is bona fide in making her application for security. She is an elderly woman of modest means and would understandably be most concerned about the costs and delays associated with the appeal process.
Whether an order for security would stifle the litigation
There is at least potential for an order for security to stifle the appeal. The respondents are already on notice that the wife intends to commence bankruptcy proceedings against them. They are presumably having to fund the costs of pursuing the appeal in circumstances where the wife concedes that the estate lacks the necessary funds to do so (other than potentially by disposing of real estate in Italy). An order requiring the respondents to find funds to secure the wife’s costs will impose a further burden.
Whether the litigation may involve a matter of public importance
It was not suggested there was any matter of public importance involved, notwithstanding that the respondents seek to raise an issue concerning the Constitution.
Delay in bringing the application for security
The Rules previously provided for an application for security for costs to be made within 21 days of the date of service of the Notice of Appeal. The Rules have since been amended and no time limit is now provided. Nevertheless, in our view, it is desirable for an application for security for costs to be filed as soon as practicable after the appeal has been instituted.
In the present matter, nine months elapsed before the application for security was made. By that stage, all directions for the preparation of the appeal had been complied with. With one proviso, the only matter remaining was for each party to present their oral submissions.
The proviso concerns the fact the respondents seek to raise a “matter arising under the constitution” on the hearing of the appeal, but have not given notice to the Attorneys-General pursuant to s 78B of the Judiciary Act 1903 (Cth).Although counsel for the respondents doubted notice was necessary, we suggested that the safer course would be for notices to be given. Counsel for the respondents indicated this would be attended to promptly, and it will then be a matter for the Attorneys-General to determine whether they wish to be heard on the appeal.
We accept that the delay in making the application for security could be referable in part to the fact that the costs orders in the substantive proceedings were not due for payment until 21 April 2011. However, three months still elapsed from that date before the application was made – and the substantive property settlement sum had remained unpaid since 31 January 2011.
The wife has provided no evidence of the extent of legal costs incurred to date in relation to the appeal, nor how much more she anticipates incurring in presenting oral argument. It is not to be expected that a party seeking security for costs will always provide a schedule of anticipated costs (Knowles & Green [2010] FamCAFC 31 at [43]); however, clearly a significant proportion of the costs to be incurred in the appeal have now been incurred. In this regard it is noted that counsel have advised the Appeals Registrar that the estimated hearing time of the appeal is only half a day.
The wife’s costs of making her application for security were estimated at $4,000, and the respondents’ costs were estimated at $5,000. These amounts would have gone a long way toward meeting the costs yet to be incurred in the appeal. In our view, the high costs incurred in making claims for security for costs highlight the need for caution in pursuing such applications.
Whether there would be difficulty in enforcing an order for costs
The wife gave evidence in support of her application that she was concerned that “the appeal will leave me substantially out of pocket and force me to sell my home to pay my ongoing legal fees”. She testified that she has been forced to borrow from her son to meet her legal fees to date, and is still indebted to her solicitors in an amount of $10,000.
The wife relies heavily on the fact that none of the money ordered to be paid by the respondents has been received to date. Her counsel initially asserted that not only the costs orders but also the substantive order requiring payment of $49,227 were made against the respondents personally, not in their capacity as executrices. Counsel later resiled from that position to the extent that he submitted only the costs orders were made against the respondents personally.
We accept that the orders for costs were expressed to be against “the Respondents”, and that they were the named parties in the proceedings. Notwithstanding this fact, as presently advised, we have difficulty in accepting that even the costs orders were made against the respondents personally. In this regard we note that the substantive property settlement orders, including the order requiring the payment of the lump sum, were expressed to be made against “the Respondents”, but it is now accepted these cannot have been intended to be made against them personally.
We were not directed to any finding by the Federal Magistrate of any conduct on the part of the respondents that would have justified an order for costs being made against them personally. On the contrary, one of the respondents asserted in her affidavit that no such finding had been made and that attempts made by counsel for the wife “to seek personal liability” against the respondents have “been rejected every time”. An order for costs against an executor personally is an exception to the general rule, and accordingly such an order would in our view require justifying reasons to be given: see for example Lathwell v Lathwell [2008] WASCA 256.
We are therefore not persuaded that the respondents, in their personal capacity, are in default of any obligation imposed on them in these proceedings. Absent evidence of impropriety in the conduct of this appeal, we would not require them to give security for costs in their personal capacity as was sought by counsel for the wife. There is no evidence of impropriety. On the contrary, as we have already observed, the appeal has been prosecuted with diligence and the grounds are not demonstrably unmeritorious.
More significantly, counsel for the wife submitted that the respondents had the means to make the payment of the $15,000 sought. The respondents did not provide evidence to the contrary (albeit they claimed their personal financial circumstances were irrelevant). In these circumstances, counsel for the wife was unable to explain to our satisfaction why it was necessary for an order for security for costs to be made against the respondents personally, as it would logically follow that the respondents would have the capacity to meet a costs order, if made against them, upon dismissal of the appeal.
If we were minded to make any order for security for costs, it would only be against the respondents in their capacity as executrices of the estate. Counsel for the wife properly conceded that although the trial Judge found that the estate, at one stage, had funds to meet an order for security for costs, those funds have now been expended. Counsel further conceded that the only way in which the estate could now be put into funds to meet the proposed order for security was by the realisation of the real estate in Italy. Assuming, contrary to the argument now advanced by the respondents, that such realisation is possible, there is no evidence to indicate that this could be achieved prior to the hearing of the appeal, notwithstanding the finding of the Federal Magistrate, at [130], that the property in Italy is “readily realisable”.
Furthermore, counsel for the wife submitted that the Family Court of Australia has “jurisdiction” over the land in Italy and could require the property to be charged with payment of the costs sought by the wife by way of security. If that is so, and we express no view on the proposition, then the same would apply to any costs order made against the estate after the appeal is heard. Furthermore, some of the property in Italy apparently remains in the name of the wife, since there was no evidence she has been asked to sign the documents required to comply with her obligation to transfer that property to the husband’s estate. Although she has only a 2/9th interest in that property, her interest was valued at $13,260. That property could be made available to her in full or partial satisfaction of any costs order made in the appeal.
Conclusion and costs
It will be recalled that s 117(2) of the Act provides that before making an order for security for costs, a Court must be of the “opinion that there are circumstances that justify it in doing so” (our emphasis).
For the reasons we have given, we are not persuaded that the circumstances justify the respondents being required to provide security, either in their personal capacity or as executrices. Even had we been so persuaded, we would not have been prepared to make the “springing order” proposed by the wife for the appeal to be dismissed in the event of non-compliance with any order for security. At best, the appeal may have been stayed pending compliance; however, such an outcome would be unsatisfactory given the need for the appeal to be dealt with expeditiously.
Counsel for the wife conceded that an order for costs should be made against the wife in the event her application for security failed. Counsel for the respondents accepted that an order in the sum of $4,000 would be appropriate, and properly conceded that such sum should be offset against the costs ordered on the stay application. To the extent that any balance remains payable by the wife, execution against the wife should be stayed pending finalisation of the appeal, given the wife’s modest financial circumstances.
I certify that the preceding forty one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Coleman, Thackray and Strickland JJ) delivered on 25 August 2011.
Associate:
Date:
25
5
2