Passey and Passey and Anor (Costs)

[2010] FamCA 147

FAMILY COURT OF AUSTRALIA

PASSEY & PASSEY AND ANOR (COSTS) [2010] FamCA 147

FAMILY LAW - COSTS - Applicant seeks costs against the second respondent - Second respondent wholly unsuccessful in application for review of Judicial Registrar’s orders - Second respondent breached his trustee obligations and acted contrary to an undertaking voluntarily given – Indemnity costs ordered

Family Law Act 1975 (Cth) ss 117(1), 117(2), 117(2A)(a) – (g)
Family Law Rules 2004

Colgate-Palmolive Company and Anor v Cussons Pty Ltd (1993) 46 FCR 225
In the marriage of Munday & Bowman (1997) FLC 92-784
Penfold v Penfold (1980) FLC 98-800
Re Permanent Trustee Australia Limited (1997) 137 CLR 190
Robinson & Higginbotham (1991) FLC 92-209
Yunghanns v Yunghanns (2000) FLC 93-209

APPLICANT: Ms Passey

FIRST RESPONDENT: Mr Passey

SECOND RESPONDENT: Mr Fyve

FILE NUMBER: NCC 3672 of 2007

DATE DELIVERED: 26 February 2010

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: The Hon. Justice Ryan

HEARING DATES: Written submissions

REPRESENTATION

SOLICITOR FOR THE APPLICANT: H Firm

SOLICITOR FOR THE FIRST RESPONDENT: No appearance

SOLICITOR FOR THE SECOND RESPONDENT:

Attwaters

Mr Graham

Orders

1. That Mr Fyve pay the costs incurred by Ms Passey of the review application commenced by him on 26 May 2008 calculated from that date until 15 July 2009.

2. That the quantum of costs payable pursuant to the above order shall be calculated on an indemnity basis and as assessed.

3. Interest on the amount assessed is payable at the applicable rate set out in the Family Law Rules 2004 commencing from 28 days after the costs have been assessed.

IT IS NOTED that publication of this judgment under the pseudonym Passey & Passey & Anor (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC3672 of 2007

MS PASSEY

Applicant

And

MR PASSEY

First Respondent

And

MR FYVE

Second Respondent

REASONS FOR JUDGMENT

1. On 15 July 2009, I entered judgment and verdict in favour of Ms Passey against Mr Fyve in the sum of $133,257.  These orders were made in the context of an application by Mr Fyve for a review of the decision of Loughnan JR who ordered him to pay Ms Passey $130,800.  I determined Ms Passey’s loss was $105,521 to which interest of $27,736.74 was added. 

2. Ms Passey’s action against Mr Fyve was undertaken in the Court’s accrued jurisdiction within the context of Ms Passey’s application for property settlement orders against her former husband.  Central to Ms Passey’s claim for equitable compensation against Mr Fyve was her claim, that in breach of his obligation to her as trustee, Mr Fyve transferred title in a property referred to in the primary judgment as “S property”. 

3. Mr Fyve did not dispute he had breached his obligations as trustee to Ms Passey.  For reasons discussed in the primary judgment, the trust asset was lost and the hearing concerned Ms Passey’s claim for equitable compensation against Mr Fyve. 

4. Notwithstanding his breach of trust Mr Fyve submitted that Ms Passey’s claim for compensation should be denied.  He argued that by reason of the doctrines of election, equitable estoppel or waiver, or in the alternative the doctrine of unconscionability, Ms Passey’s claim for compensation should be dismissed.  As would be apparent from my opening remarks, Mr Fyve failed to establish his entitlement to relief as a consequence of any of the equitable defences upon which he relied. 

5. An application for costs is governed by s 117 of the Family Law Act 1975 (Cth). Section 117(1) sets out the general rule that subject to s 117(2), s 117AA and s 118, each party to proceedings shall bear his or her own costs. Neither party submitted s 117AA nor s 118 was relevant. Section 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order for costs (Penfold v Penfold (1980) FLC 98-800).

6. There were three matters, which whether considered individually or cumulatively established circumstances that justify the making of a costs order in favour of Ms Passey.  Firstly, the relationship between trustee and beneficiary is fiduciary, described as “a fiduciary capacity of the highest order”:  RePermanent Trustee Australia Limited (1997) 137 CLR 190 at 199. Secondly, on 18 March 2005, Mr Fyve gave an undertaking that he would not deal with the S property “until this matter is resolved”. Mr Fyve transferred title in S property in a breach of his undertaking. Finally, the outcome of this hearing is not materially different to the outcome ordered by the Judicial Registrar.

7. To determine what order, if any, should be made as a consequence of my finding made pursuant to s 117(2) I am required to consider those matters set out in s 117(2A)(a) – (g) in so far as they are relevant.

8. Subsection (a) is concerned with the parties’ financial circumstances. Ms Passey is reliant upon benefits paid by Centerlink.  Her income statement which is dated 30 October 2009, showed that she receives $196.84 (Family Tax Benefit Part A), $93.10 (Family Tax Benefit Part B), rent assistance of $125.16, parenting payment $554.90, $6 (pharmaceutical allowance) and pension supplement of $19.60.  These amounts are paid fortnightly.  In addition for the preceding financial year Ms Passey earned $640.72 interest and received $2,034.73 child support.  She has few assets with her most valuable asset being savings of approximately $32,000 as at 28 July 2009.

9. Mr Fyve retired from the paid workforce in June 2000.  He has a variety of serious medical conditions and it is unlikely he will in the future have paid employment.  In his affidavit filed on 29 October 2009, Mr Fyve disclosed that he is in receipt of a Disability Support Pension of $229.42 per fortnight.  He is otherwise reliant upon his partner for income support.  Mr Fyve’s partner earns approximately $40,000 per annum.  She is not a party to the proceedings and her income is not relevant to the matters at issue.  Mr Fyve’s assets comprise a home and 27 acres worth $450,000, a rural property worth $140,000, $10,000 motor vehicle and a small account of cash at bank.  He has a credit card liability of $9,000, a $2,000 overdraft to a credit union and a motor vehicle loan of $14,000. 

10. Comparatively, Mr Fyve is in a better financial position than Ms Passey and the application of the subsection weighs in her favour.

11. Neither party is in receipt of a grant of legal aid.

12. There are no s 117(2A)(c) or (d) matters which require consideration.

13. Subsection (e) requires the Court to consider whether any party to the proceedings has been wholly unsuccessful. As I understood it, Mr Fyve conceded that he had been wholly unsuccessful.  If my interpretation of his submissions is incorrect, this is in any event my view.  The application of subsection (e) favours Ms Passey.

14. Subsection (f) is concerned with offers to settle the proceedings and the terms of any such offer.  Mr Fyve relied on an offer to settle he made on 17 July 2008.  Excluding formal parts, the terms of the offer are set out below:

    I am instructed to put an offer of settlement to your client in the following terms:

    That in relation to order 2 of the orders made on 6 May 2008, the sum of $115,856.83 be substituted for the sum of $130,800. 

    You will be quick to appreciate that the point of the offer is to allow my client a credit in relation to the sum of $14,943.17 your client received at the conclusion of the proceedings.

    Having read the reasons for judgment of the Judicial Registrar it would seem to me, with all due respect to him, that no allowance was made for this sum. 

    My client’s offer to your client is conditional upon me having an opportunity to read any material which is produced in answer to the subpoena referred to above, in other words my client does not intend to be bound by the offer until such time as I have looked at the material and advised him.  From what I know of the matter thus far I do not expect that there will be anything produced in answer to the subpoena which is likely to vary the terms of my client’s offer contained herein. (My emphasis)

    In relation to my client’s position generally, I advise that he has retained other solicitors to advise him in relation to any other remedies he might have arising out of the circumstances of these proceedings.  I expect that once the proceedings with your client have been completed he will then be able to then look for redress elsewhere which will ultimately put him in a position to be able to pay to your client anything which he might be required to pay under the terms of the orders in these proceedings.

15. The terms of the offer make it clear that the offer was conditional and made in circumstances where Mr Fyve declared he would not be bound by it:  that is, bound in the event his offer was accepted.  The offer was not a genuine unconditional offer to settle.  The final paragraph of the correspondence above referred to introduced a significant degree of uncertainty about when, if at all, the suggested amount would be paid to Ms Passey.  In Robinson & Higginbotham (1991) FLC 92-209 at 78,417, Nygh J said: “…. It is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, ….” At its highest Mr Fyve’s offer was a conditional proposal the terms of which were unclear and which he, as offeror had not agreed would bind him. Although it was asserted that his offer of settlement attracted the provision of the subsection, I do not agree. I give the purported offer no weight.

16. Subsection (g) entitles the Court to take into account such other matters as the Court considers relevant. 

17. It is most relevant that these proceedings arose because of Mr Fyve having breached his trustee obligations and that he acted contrary to an undertaking voluntarily given and which he knew was relied upon by Ms Passey.  These are very serious matters.  Not only do these factors weigh heavily in favour of an order for costs, they support Ms Passey’s contention that costs should be ordered in her favour on an indemnity basis.  Indemnity costs are rarely awarded and when awarded, it is generally accepted that the circumstances which warrant elevating an order for party/party costs to indemnity costs would be exceptional and are “still an exception in this and other jurisdictions.”  In the marriage of Munday & Bowman (1997) FLC 92-784 at 84,661 per Holden CJ. In Munday & Bowman Holden CJ cited with approval Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225 in particular the circumstances identified by Shepherd J where, in the exercise of the Court’s discretion indemnity costs have been warranted. Subsequently, in Yunghanns v Yunghanns (2000) FLC 93-029 the Full Court of the Family Court commented that the category of circumstances that would justify an order for indemnity costs is not closed.

18. When the factors discussed above are considered I am strongly satisfied that in the extraordinary circumstances of this case an order for indemnity costs in favour of Ms Passey is warranted.  The Judicial Registrar made an order for costs in favour of Ms Passey for her costs incurred in that component of the hearing.  Thus, my orders will address the period, which commences from the date upon which Mr Fyve commenced the review of the Judicial Registrars orders. 

19. On behalf of Ms Passey, it was submitted that the Court would quantify the award of costs.  To this end, she submitted the costs agreement entered into with her lawyers and her legal fees, which were $28,127.71.  Although both appeared to be modest, Mr Fyve sought that in the event costs were ordered against him that these be assessed. I am not in a position to assess Ms Passey’s costs and will order that they be assessed.      

20. For these reasons I make the orders identified at the start of this judgment.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan

Associate: 

Date:  26 February 2010