Paret and Paret and Ors (No.2)
[2017] FCCA 2507
•25 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PARET & PARET & ORS (No.2) | [2017] FCCA 2507 |
| Catchwords: FAMILY LAW – Costs – indemnity costs – where applicant was wholly unsuccessful – where applicant made unsubstantiated allegations of fraud – where conduct of applicant caused delay and lengthened proceedings – whether circumstances exceptional and warrant award of costs on indemnity basis. |
| Legislation: Family Law Act 1975, ss.117(1) & (2) and 117(2A) |
| Cases cited: Paret & Paret & Ors [2016] FCCA 3271 Nada & Nettle (Costs) [2014] FamCAFC 207 |
| Applicant: | MR PARET |
| First Respondent: | MS PARET |
| Second Respondent: | MR MACOLD |
| Third Respondent: | MS MACOLD |
| File Number: | ADC 827 of 2016 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 17 March 2017 |
| Date of Last Submission: | 17 March 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 25 October 2017 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the First Respondent: | Ms P Kari |
| Solicitors for the First Respondent: | Rosey Batt & Associates |
| Counsel for the Second & Third Respondents: | Ms M Ross |
| Solicitors for the Second & Third Respondents: | Mildwaters Lawyers |
ORDERS
The applicant do pay the first respondent’s costs in the amount of FORTY SIX THOUSAND, SIX HUNDRED AND FIFTY THREE DOLLARS AND ONE CENT ($46,653.01).
The applicant do pay the second and third respondent’s costs in the amount of FORTY SEVEN THOUSAND, ONE HUNDRED AND FIFTEEN DOLLARS AND FIFTY CENTS ($47,115.50).
All extant applications are dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Paret & Paret & Ors (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 827 of 2016
| MR PARET |
Applicant
And
| MS PARET |
First Respondent
| MR MACOLD |
Second Respondent
| MS MACOLD |
Third Respondent
REASONS FOR JUDGMENT
This is an application by the first, second and third respondents for costs of these proceedings. The first respondent has filed an Application in a Case. The second and third respondents made an oral application.
The respondents seek costs on an indemnity basis. The applicant opposes any order for costs.
On 20 December 2016, I summarily dismissed the applicant’s claim for property orders. It is not necessary to repeat the factual background in any detail. The applicant was wholly unsuccessful in his claim: Paret & Paret & Ors [2016] FCCA 3271.
In brief, the applicant husband sought to have set aside the sale of the family farm ‘(omitted)’ which had been sold by the first respondent to the second and third respondents. The second and third respondents are the son and daughter-in-law of the first respondent. The applicant husband and the first respondent wife separated in 2007. The husband, in effect, left the wife to manage the farm and, more importantly, the very significant debts that had been incurred during the marriage. The parties are not divorced. The sale took place in May 2010. The applicant became aware of the sale at some time in 2014. He made an application to this Court seeking an alteration in the property interests of the parties on 11 March 2016. Initially represented on the first return date, the applicant proceeded thereafter to represent himself. I have previously summarised the procedural background to this matter in my judgment dismissing his application. He defaulted on orders made by me and his conduct occasioned an adjournment. Due to his failure to place affidavit evidence before the Court, it was necessary to hear evidence from him and hearings took place on 27 July 2016 and 6 September 2016. The applicant made only fragmentary disclosure of his financial records. The nature of the allegations made by the husband required all of the respondents to file a substantial amount of affidavit material covering events and financial matters that have transpired over the last 25 years or more.
The first respondent wife has filed an affidavit dated 13 March 2017 on which she relies for the purpose of this application (‘the wife’s affidavit’). The second respondent has filed an affidavit dated 13 March 2017 on which he and third respondent rely for the purpose of this application. The applicant has filed an affidavit dated 17 March 2017 that sets outs his grounds of opposition to the orders sought. The first respondent wife points to the conduct of the applicant during the course of proceedings as forming a proper basis for an award of indemnity costs in her favour. The matters identified by the wife are as follows:
a)The failure to bring proceedings for almost two years after becoming aware of the sale of (omitted);
b)Failure to make full and frank disclosure of relevant documents despite written requests to do so;
c)A failure to inspect any of the documents discovered by the first respondent;
d)Failure to file affidavit material in accordance with orders made by me on 26 April and 27 July 2016;
e)Filing written submissions on 15 July 2016 which introduced new evidence and previously undisclosed documents;
f)His failure to comply with orders as to affidavits and disclosure resulting in the hearing of 27 July 2016 requiring oral evidence from him whereas all of the information adduced on that day could have been the subject to an affidavit filed prior to the hearing; and
g)As a result of his failure to comply with orders as to affidavits, the hearing on 27 July 2016 was adjourned to 6 September 2016 to enable cross-examination to occur.
The wife says that the proceedings were unnecessarily prolonged and unnecessary costs were incurred to her because of the conduct of the applicant, and in particular his failure to comply with orders.
The wife points to the fact that the husband was wholly unsuccessful in this matter as being a relevant factor to be considered in her application for costs.
The wife’s most recent affidavit confirmed the financial position she outlined in her affidavit of 21 April 2016 and in her Amended Financial Statement dated 20 May 2016. She is presently 69 years of age and in dire financial circumstances. She continues to service a number of debts that remain outstanding from the period of the marriage and to which the applicant has not made any contribution. Her present income is approximately $350 per week. She has no savings and once she allows for rent, utilities, food and repayments towards the outstanding debts, she has virtually nothing left. She cannot afford to retire.
As a result of having to take part in these proceedings, she has incurred legal costs in the amount of $48,274.51. The details of how those costs were incurred, and the costs agreement between her and her solicitor, are set out in her affidavit. From that amount, I must subtract the amount of $1,621.50 already paid by the applicant pursuant to an earlier costs order made by me. That leaves a figure of $46,653.01. In her submissions on behalf of the wife, Ms Kari acknowledged those authorities which established that indemnity costs are a significant departure from the normal course and should only be awarded in circumstances that are exceptional. She submitted that the husband chose to be self-represented, did not comply with orders as to the preparation of the case, and that had he obtained timely legal advice, the matter should have been capable of resolution without the need for a hearing. She submitted that the first respondent was in an invidious position with no ability to pay the costs and had no choice at her age except continuing to work. It was also submitted that the applicant had not been forthcoming in detailing his financial circumstances to the Court. Ms Kari referred me to the affidavit filed by the second respondent. Ms Kari submitted that there was reason to believe that the applicant has access to funds from another source, namely his de facto partner, Ms V. She pointed out that the applicant has already paid the order for costs that was made against him by me on an earlier occasion.
For the second and third respondents, Ms Ross adopted the submissions of Ms Kari and referred me to the affidavit filed by the second respondent. The second and third respondents incurred costs to the date of hearing these submissions in the amount of $48,733.00. From that amount I must subtract $1,621.50 for costs already paid by the applicant pursuant to my earlier orders. That leaves a figure of $47,115.50. Ms Ross submitted that despite claims made by the applicant throughout proceedings that he was impecunious, enquiries made by the second respondent tend to suggest otherwise. It was submitted that the applicant has financial resources that he has not declared in these proceedings. It was common ground in this matter that the applicant has been in a de facto relationship with Ms V since 2009. The second respondent asserts that Ms V purchased a property situated on 150 acres of land with a 3 bedroom home in (omitted), Victoria, in March 2010. That property is said to be valued at approximately $400,000. Further, on 10 January 2014, the second respondent asserts that the applicant resigned as a director and secretary of Company C and transferred all of his shares to Ms V. That company then purchased a house and land in (omitted), Victoria, for $97,500.
The second respondent asserts that the applicant paid the amount of costs awarded against him on 27 July 2016 in the amount of $1,621.50 to his solicitors trust account by way of an electronic transfer from the bank account of Ms V. On the basis of the above, the second respondent asserts that the husband has an equitable interest in the property owned by Ms V given the length of their relationship and presumably his financial and non-financial contributions to it. Ms Ross also submits that it can be inferred that the applicant has access to funds from Ms V as demonstrated by the fact that the previous costs order was satisfied from an account in her name.
With the exception of disputing that he has an equitable interest in any property owned by Ms V, none of those matters were disputed by the applicant during the course of submissions on costs.
The second respondent’s affidavit sets out the extent to which the financial position of he and third respondent has declined. He says that the cost of the legal proceedings has set them backwards financially and he and his wife may be left with no other option than to sell the farm. At present, they are simply holding on to see what the next 12 months brings.
In addition to making a complaint as to the applicant’s conduct in these proceedings, which mirror those of the first respondent, the second and third respondent point to the fact that neither of them was a party to the marriage between the applicant and the first respondent, they purchased (omitted) in bona fide circumstances and have had to incur significant costs because of the conduct of the applicant.
After having heard submissions in this matter, I received an affidavit of the second respondent annexing the costs agreements entered into by he and the third respondent with their solicitor and the letter of costs disclosure from their counsel.
Ms Ross submitted that nothing in the affidavit filed by the husband contradicts her client’s affidavit. She submitted that impecuniosity is not a bar to making a costs order.[1] Ms Ross submitted that the affidavit material establishes that her clients have lost income in the order of $50,000, and incurred increased expenses of $10,000 as a direct consequence of having to participate in these proceedings.
[1] Nada & Nettle (Costs) [2014] FamCAFC 207.
The applicant husband’s affidavit of 17 March 2017 takes issue with my judgment dismissing the application and seeks to re-agitate factual matters. It adds nothing of substance to the question of whether he should be required to pay costs on an indemnity basis, or any other basis. In his submissions, the applicant submitted that each party should pay their own costs. He asserted from the bar table that his partner, Ms V, has paid $11,000 towards costs on his behalf and that he had paid a further amount of approximately $2,200 to a local barrister in (omitted). He has provided no evidence to support this claim. He said that his own impecuniosity prevented him from putting together a decent case. He denied that he had any equitable interest in properties in Ms V’s name.
Consideration
It is a foundational principle under the Family Law Act 1975 (Cth) (‘the Act’) that in the ordinary course, each party is to bear their own costs.[2]
[2] Section 117(1) of the Act.
There remains a discretion to award costs:
“(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.[3]”
[3] Section 117(2) of the Act.
In considering whether to make an order, I must have regard to the following matters as relevant:
“(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.[4]”
[4] Section 117(2A) of the Act.
It is established that the Court is not prevented from finding a single factor identified in s.117(2A) from being the foundation for an order for costs.[5] I must however, take all of the matters identified in that subsection into account.
[5] PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL [2005] FamCA 158.
This Court has power in an appropriate case to award costs on an indemnity basis.[6] Such an order involves a very significant departure from the ordinary course and should only be made in exceptional circumstances.[7] Over the years, the authorities have identified a variety of circumstances which might enliven the discretion to award costs, but there are no definitive criteria and the categories of circumstance in which the discretion is enlivened are not closed.[8]
[6] In the Marriage of Kohan (1992) 112 FLR 151.
[7] Ibid Kohan, Op Cit Nada & Nettle.
[8] Yunghanns v Yunghanns (2000) FLC 93-029.
Some categories of matter in which it has been held appropriate to make an order for indemnity costs have been: where a party makes allegations of fraud knowing them to be false; or a party makes irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the Court and to other parties; the fact that proceedings had been instituted maintained for an ulterior motive; where proceedings have been commenced in disregard of known facts, or clearly established law; and, the making of allegations which ought never to have been made or a case based on groundless contentions.[9]
[9] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at [257].
Notwithstanding the above, it has been held that it is not a ‘condition precedent’ to the exercise of the discretion that a collateral purpose or fraud be established against the party against whom indemnity costs are sought.[10]
[10] D & D (Costs) (No.2) [2010] FamCAFC 64 at [28].
I turn to consider the matters under s.117(2A) of the Act.
a)The financial circumstances of each of the parties to the proceedings
It is clear that the financial circumstances of each of the respondents is, and I accept, dire. I accept the matters identified in their respective affidavits. As submitted by Ms Ross, the financial circumstances of the applicant himself are still not clearly known. He submits that he is on a Centrelink pension. He has not disputed the circumstances of his living arrangements with Ms V, except to make the assertion that he does not have any equitable interest in property that she owns. It seems clear from these proceedings that he has some ability to obtain financial assistance from Ms V. The extent to which he is able to do so remains unknown.
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
This consideration does not apply to this matter.
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
The criticisms identified by the first respondent wife about the applicant’s conduct in these proceedings are all valid and I accept them, except for the complaint that it took the applicant approximately two years in which to make a claim having discovered the sale of (omitted). It has not been demonstrated to me how that delay of itself has contributed to, or increased, the costs of any of the respondents. The failure of the applicant to make proper discovery and file appropriate and relevant affidavit material that properly supported his contentions was a significant feature of this matter and caused prejudice to the respondents. The applicant made unsubstantiated allegations of fraud, a matter of which I will comment later in these reasons.
d)Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
This category is closely related to subparagraph (c) above. These proceedings were considerably lengthened by the fact that the applicant did not comply with orders of this Court
e)Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The applicant was wholly unsuccessful in his application. The applicant was on notice from an early stage in the proceedings that the respondents would seek summary dismissal of his application.
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
This consideration does not apply to this matter.
g)Such other matters as the court considers relevant
I consider it a relevant matter that the applicant instituted these proceedings knowing that the public record indicated that (omitted) had been transferred to the second and third respondents for value without apparently having made any enquiries of either the applicant wife or the second and third respondents as to the circumstances that surrounded that transaction. It must have been apparent to him that the wife was left with very considerable debts at the time of separation. It must have been apparent to him that she would have difficulty servicing those debts. Without having made any enquiry of the respondents as to the basis of that transaction, the applicant proceeded to initiate these proceedings making allegations of fraud against each of the respondents. In doing so, he has caused all of the respondents to incur very significant costs. I have found the allegations of fraud to be unsubstantiated. He instituted proceedings some nine years after separation occurred, a period of time during which, as I have noted in my judgment dismissing his application, he made no effort to assist with the management of (omitted) and no significant effort to contribute towards the liabilities that he and the wife had incurred. The parlous financial circumstances of the wife are due in no small part to the applicant’s conduct after separation. Whilst the considerations listed in s.117(2A) clearly relate to the circumstances of the proceedings and the conduct of the parties to the proceedings, the matters that I have identified are relevant to his state of mind and motives at the time he initiated the proceedings. I conclude that they are matters to which I can have regard.[11]
[11] Section 117(2A) of the Act.
I am satisfied firstly, that the circumstances of this matter justify the applicant being required to pay the costs of the respondents.
I am satisfied that the circumstances of this matter are unusual and exceptional and warrant the court departing from the usual course as to costs orders and making an order that costs be made on an indemnity basis.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Date: 25 October 2017
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