Paviello & Paviello (No 2)
[2022] FedCFamC1F 795
Federal Circuit and Family Court of Australia
(DIVISION 1)
Paviello & Paviello (No 2) [2022] FedCFamC1F 795
File number(s): SYC 2323 of 2017 Judgment of: WILSON J Date of judgment: 24 October 2022 Catchwords: FAMILY LAW – NATIONAL ARBITRATION LIST– application for indemnity costs – application dismissed – party/party costs ordered. Legislation: Family Law Act 1975 (Cth) ss 45A(6), s 70NFB(1), 117(1),(2), 117AC and s 117(2A) Cases cited: Agosti & Agosti [2021] FedCFamC1F 72
Air Canada v Secretary of State for Trade [1983] 2 AC 394
Allesch v Maunz (2000) 203 CLR 172
Al-Medinni v Mars UK Ltd [2005] EWCA Civ 1041
Anison & Anison [2019] FamCAFC 108
Bant v Clayton (Costs) (2016) 56 Fam LR 31
Calderband v Calderbank [1975] 3 All ER 333
Chang v Su (2002) 29 Fam LR 406
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Dick v Piller [1943] KB 497
EB v CT (No 2) [2008] QSC 306
Fitzgerald v Fish (2005) 33 Fam LR 123
Grimshaw v Dunbar [1953] 1 QB 408
Hatcher v Cohn (2004) 139 FCR 425
Haven & Haven [2020] FamCA 954
In the Marriage of Gelley (No 2) (1992) 15 Fam LR 483
In the Marriage of Higginbotham & Robinson (1991) 14 Fam LR 559
In the Marriage of Hogan (1986) 10 Fam LR 681
In the Marriage of Kohan (1992) 16 Fam LR 245
In the Marriage of Weir (1992) 16 Fam LR 154
International Finance Trust Company Ltd v New South Wales Crime Commission (2009) 240 CLR 319
Kyle & Kyle [2022] FedCFamC1F 251
Penfold v Penfold (1980) 144 CLR 311
Paviello & Paviello [2022] FedCFamC1F 592
Phillips & Hansford [2020] FamCAFC 28
Re JRL, ex parte CJL (1986) 161 CLR 342
Reid v Brett [2005] VSC 18
Sainsbury's Supermarkets Ltd and others v Mastercard Inc and others (European Commission intervening) [2020] 4 All ER 807
Sfakianakis v Sfakianakis (2019) 59 Fam LR 419
Smith & Fields [2013] FamCA 505
Smith v New South Wales Bar Association (1992) 176 CLR 256
Sommer & Sommer [2021] FedCFamC1F 37
Summit v Summit [2009] FamCA 365
Taylor v Taylor (1979) 143 CLR 1
Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471
Worth & Worth (No 2) [2019] FamCAFC 126
Division: Division 1 First Instance Number of paragraphs: 108 Date of last submissions:: 29 September 2022 Date of hearing: On the papers Place: Melbourne Counsel for the Applicant: Mr J. Morris SC with Mr A. Todd Solicitor for the Applicant: Jordan Djundja Lawyers Counsel for the First Respondent: Mr M. Stevens Solicitor for the First Respondent: Blanchfield Nicholls Counsel for the Second Respondent: Mr D. Dura Solicitor for the Second Respondent: Parker Law ORDERS
SYC 2323 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PAVIELLO
Applicant
AND: MR B PAVIELLO
First Respondent
MR A PAVIELLO
Second Respondent
order made by:
WILSON J
DATE OF ORDER:
24 October 2022
THE COURT ORDERS THAT:
1.The wife’s application dated 14 September 2022 for orders requiring the husband and the husband’s brother to pay her costs of and incidental to the arbitration on an indemnity basis is dismissed.
2.Each party’s costs of the proceeding including costs of the arbitration must be that party’s own costs.
3.The wife must pay the first and second respondents’ costs of and incidental to the wife’s failed review application dismissed in Paviello & Paviello [2022] FedCFamC1F 592.
4.The husband’s and the second respondent’s costs of and incidental to the wife’s failed review application must be assessed by a registrar on a party/party basis.
5.The wife must pay those assessed costs within 90 days of the order by a registrar of this court assessing those costs.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 Paviello & Paviello has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
Introduction
The wife, as review applicant, failed in her application under s 13J of the Family Law Act in which she sought orders different to those ordered by the arbitrator.[1]
[1] Paviello & Paviello [2022] FedCFamC1F 592
On 2 September 2022 I ordered any application for costs to be filed and served by 15 September 2022.
Competing costs applications have emerged. Most basically expressed they were as follows –
(a)the wife’s application for orders requiring the husband and the husband’s brother to pay her costs of and incidental to the arbitration on an indemnity basis;
(b)alternatively, the wife’s application for orders requiring the husband and the husband’s brother to pay her costs of and incidental to the arbitration on an ordinary basis; and
(c)additionally, pursuant to s 117(1) of the Family Law Act the wife’s application for an order that each party pay his and her own costs of and incidental to the review application.
The husband brought his own costs application by application in a proceeding dated 15 September 2022. In it he sought orders as follows –
(a)the the wife pay his costs, fixed in the sum of $450,000 in relation to the wife’s application filed 13 April 2017, the wife’s application in an arbitration filed 3 June 2022 and this application;
(b)so far as the application filed 13 April 2017 was concerned, the husband sought costs according to various cascading alternatives set out in paragraph 2(a) to 2(e) of the husband’s application;
(c)if the court did not make orders in accordance with his application in paragraph 1 of his application in a proceeding, then he sought orders that the wife pay his costs as assessed by a registrar;
(d)as to his costs application in relation to the wife’s 3 June 2022 application in an arbitration, the husband sought costs on an indemnity basis or if not, costs to be assessed by a registrar on a party/party basis; and
(e)as to his costs application on this costs application, the husband sought costs on an indemnity basis or if not, costs to be assessed by a registrar on a party/party basis.
The second respondent (the husband’s brother Mr B Paviello) sought orders in his application in a proceeding dated 15 September 2022. The orders he sought were as follows –
(a)the wife pay the second respondent’s costs of and incidental to the proceeding on a party/party basis;
(b)alternatively the wife pay the second respondent’s costs of and incidental to the proceeding “on 13 April 2017”[2] on an indemnity basis;
(c)the wife pay the second respondent’s costs of and incidental to the wife’s application for review filed 3 June 2022 on a party/party basis or on an indemnity basis; and
(d)the wife pay the second respondent’s costs of and incidental to this costs application.
[2] This was the wording of paragraph 2 of the second respondent’s application in a proceeding, although it is ambiguous in its content.
The 2 September 2022 decision
In respect of the wife’s application dated 3 June 2022 for the review of the arbitral award, on 2 September 2022 following submissions made on 2 August 2022, I dismissed the review application. In reasons for the dismissal of that review application, I was of the view that the review applicant failed to make good her review on a question of law on any of the 9 grounds argued.
Logically, the application for costs sought by the respondents must be addressed first, the husband’s costs application being responsive to the wife’s failure on her review application. Logically, the husband’s brother’s costs application fell for determination next and last was the wife’s costs applications. To those I now turn.
The husband’s costs applications
In support of his application for costs, the husband relied on the evidence in his affidavit made 15 September 2022. The following matters were raised in that affidavit –
(a)by initiating application filed 13 April 2017, the wife sought orders for the transfer of the husband’s interest to the wife in the property at U Street, Suburb P, that the husband pay the wife $2 million and that the wife receive one half of the husband’s interest in 1 D Street, Suburb E as well as half interests in various trusts;
(b)shortly prior to the commencement of the arbitration on 9 November 2020, the wife put forward her revised version of the orders she sought in which she sought the equal division of assets and liabilities, the payment of a cash amount and the transfer to the wife of the whole of the husband’s interest in the former matrimonial home;
(c)in advance of the handing down of the award, on 10 February 2022 the wife proposed a different form of orders that she sought which included the husband transferring to the wife his interest in the former matrimonial home, orders for the husband to deliver to the wife four motor vehicles and orders for the wife to be declared as a 50% beneficial interest holder in 1 D Street Suburb E as well as the holder of a 50% beneficial interest in the Paviello Family Trust together with payment to the wife of an amount of $2,573,744 and costs in the sum of $500,000;
(d)by letter dated 10 August 2018 the husband’s solicitors wrote to the wife’s solicitors, expressed to be without prejudice save as to costs and expressed to be made pursuant to Calderbank v Calderbank;[3]
(e)the wife did not respond to the 10 August 2018 offer, whether in the time limited by the offer or at all; and
(f)after arbitration, the pool of divisible assets was divided as to 57.5% to the wife and 42.5% to the husband.
[3] [1975] 3 All ER 333.
The husband argued that the wife did not accept the 10 August 2018 offer. That was 2 years prior to the commencement of the arbitration. It was in the following terms –
"Without prejudice save as to costs"
Dear Sirs
[PAVIELLO & PAVIELLO]
We refer to the above matter and are instructed to put an offer to your client to settle this matter.
Our client offers to settle this matter on the following basis:
1.That our client pay the entirety of the balance of the mortgage secured on the title to the property at [U Street], [Suburb P] (the [Suburb P] property).
2.That our client do all acts and things and sign all instruments and documents to transfer to your client the whole of his right title and interest in the [Suburb P] property.
3.That, on 14 days' written notice to your client, our client be permitted to take possession of the two (2) [pieces of equipment] presently stored in the garage on the [Suburb P] property. Please note that our client will require access to the [Suburb P] property for a period of 8 hours on each of the two days, the first such day to be spent dismantling the [pieces of equipment] and the second such day to be spent loading eth dismantled [pieces of equipment] on the truck. It will be necessary for the truck in question to come onto the [Suburb P] property.
4.That your client be declared sole owner of all other personal property and household contents in the [Suburb P] property.
5.That your client retain sole ownership of the [Motor Vehicle 1] with the registration number ….
6.Our client is to retain ownership of all other vehicles, including [Motor Vehicle 2] and [Motor Vehicle 3].
7.Each party is to retain the amount of superannuation noted as their respective entitlement in the [Superannuation Fund 1] (…), with your client to roll over the entirety of her entitlement (member balance) to an alternative super fund of her choice.
8.That your client do all things, and sign all documents, as may be required to resign as a trustee of [Superannuation Fund 1].
9.The debt owing to the [Superannuation Fund 1] by one [Mr V] will be shared equally between the parties upon its repayment.
10.Our client retain the whole of his interest in the property situated at [W Street], [Suburb X] …
11.Unless otherwise specified in these Orders, the parties shall both be entitled to retain all assets and financial resources of any nature and kind (including but not limited to funds in bank accounts, shares, investments, interest in business, superannuation, motor vehicles) that are currently in their name, possession and control.
12.Our client is declared solely responsible for, and indemnifies your client and will keep your client indemnified forever with respect to any debt, liability or claim in his sole name or any liability that may arise in relation to items of property vesting in him pursuant to these Orders.
13.Your client is declared solely responsible for, and indemnifies our client and will keep our client indemnified forever with respect to any debt, liability or claim in her sole name or any liability that may arise in relation to items of property vesting in her pursuant to these Orders.
This offer is made under the principles in Calderbank v Calderbank and is open for 28 days from the date of this letter.
This letter may be tendered in evidence on any application in respect of costs, including an application by our client for costs against the your on an indemnity basis.
Yours faithfully
BLANCHFIELD NICHOLLS PARTNERS
It was not disputed that the correspondence dated 10 August 2018 from the husband’s solicitors to the wife’s solicitors was not answered, whether within the 28 days limited by the letter, or at all.
On 26 May 2021 the husband’s solicitors wrote to the wife’s solicitors. That letter was in two effective parts. In the first was a restatement between solicitors of a proposal first put as between counsel. That offer by the wife was rejected by the husband. However, in the second part of the letter the husband’s solicitors put a proposal, as a Calderbank offer, to the wife’s solicitors which relevantly read as follows –
Dear Sirs
[PAVIELLO & PAVIELLO]
We are informed by Mr Stevens of counsel that he was contacted by [Mr Y] on 24 May 2021, and that [Mr Y] put an offer of settlement on behalf of your client in, what we understand to be, the following terms:
1.That our client pay to CBA such amount as is required to discharge the mortgage currently registered on the title to the [Suburb P] property.
2.That our client transfer to your client his interest in the [Suburb P] property.
3.That our client pay to your client the sum of $950,000.00.
4.That our client retain his motor vehicles […].
5.That your client retain her motor vehicle.
6.That each party retain all other personal property standing in his/her name.
7.That each party retain his/her superannuation entitlement.
8.That each party otherwise be responsible for his/her own debts and other liabilities.
9.That each party pays his/her own costs of and incidental to the proceedings.
We are instructed to reject that offer.
By way of counter-offer, we are instructed to put the following:
1.That the [Suburb P] property be sold.
2.That the net proceeds of sale be divided as to 60% to your client and 40% to our client.
3.That such amount as is required to discharge the mortgage to CBA currently registered on the title to the [Suburb P] property be paid from our client's share of the sale proceeds.
4.That our client retain his motor vehicles […] (noting that, as you are aware, our client has sold [Motor Vehicle 4] and [Motor Vehicle 5], and paid the sale proceeds in reduction of the abovementioned mortgage to CBA).
5.That your client retain her motor vehicle.
6.That each party retain all other personal property standing in his/her name.
7.That each party retain his/her superannuation entitlement.
8.That each party otherwise be responsible for his/her own debts and other liabilities.
9.That each party pay his/her own costs of and incidental to the proceedings.
This offer will remain open for acceptance for a period of 14 days from the date of this letter.
This offer is made in accordance with the principles set out in Calderbank v Calderbank [1976] Fam 93.
That offer was expressed to remain open for 14 days. The husband stated that his offer in his 10 August 2018 letter and the offer in his 26 May 2021 letter went unanswered by the wife. He argued that the arbitrator’s award was more favourable than were the offers of settlement. In his solicitors’ letter dated 27 April 2022, the husband asserted that his costs were likely to exceed $400,000 so he proposed the wife paying him $300,000. He made that proposal in reliance upon Calderbank v Calderbank and expressly stated that the offer would remain open for seven days.
The 26 May 2021 letter was couched in terms by which the husband’s solicitors suggested that the wife’s best interests were served by her acceptance of the husband’s offer. The husband’s solicitors put it in the following terms –
We are instructed that it would be in your client's interests to accept our client's offer, as:
§ acceptance of our client's offer will effect a significantly better result for your client than she is likely to obtain should the arbitration currently on foot proceed to an award.
§ bringing the proceedings to an end now will save each of the parties a considerable amount In ongoing legal and other costs.
§ your client will avoid the risk of an adverse costs order.
In the event that your client does not accept his offer within the time allowed, our client reserves the right to rely on the offer in relation to the issue of costs.
The question therefore became whether the wife achieved a more advantageous or favourable result from the arbitration or whether she would have achieved a better outcome by accepting the Calderbank offer put in the 26 May 2021 proposal. In answering those questions it became necessary to dissect the arbitrator’s award to ascertain whether, in fact, the husband’s contentions were correct.
The first proposal put by the husband in his 26 May 2021 letter related to the application of the proceeds of sale of the Suburb P property as to 60% to the wife and 40% to the husband.
Paragraphs 1, 2 3 and 4 of the arbitrator’s orders addressed the Suburb P property. Paragraph 1 related to the husband effecting a transfer of his interests in the Suburb P property to the wife for which the wife was to pay him $815,503.55.
Paragraph 2 of the arbitrator’s orders provided that if the wife did not do as was provided for in paragraph 1 or she elected not to retain ownership of the Suburb P property, then the parties were to sell the property for the highest price reasonably obtainable.
Paragraph 3 of the award set out the precise mechanics of any sale.
Paragraph 4 of the arbitrator’s orders addressed the disbursement of funds received from a sale. Paragraph 4.4 provided that 42.5% of the net balance was to be paid to the husband from which the husband was to simultaneously pay the wife $312,603.70 and the remaining net balance was to be paid to the wife.
The husband asserted that according to that arithmetic, 40% of the proceeds of sale of the Suburb P property was ordered to be paid to him with the wife receiving 60%.
That is not how paragraph 319 of the arbitrator’s award is to be construed. The arbitrator there set out the arithmetical calculation by which a division of the net value of the parties’ assets was achieved on a 57.5% basis in favour of the wife and a 42.5% basis in favour of the husband. In other words, the result of the arbitration was not a division of the parties’ net assets on a 40% basis to the husband and a 60% basis to the wife. She derived 57.5%. Had she accepted the offer recorded in the 26 May 2021 proposal from the husband’s solicitors, she would have achieved a more favourable result than was achieved in the arbitration on that issue.
Yet the offer addressed additional matters. It was therefore incorrect to assess whether the 26 May 2021 proposal represented a better outcome than the award by reference only to the application of the proceeds of sale of the Suburb P property.
The 26 May 2021 proposal addressed the husband retaining his cars. Paragraph 7 set out in 14 paragraphs provisions about the husband’s retention of a variety of motor vehicles. To that extent, the 26 May 2021 proposal and the award were consistent in relation to the husband’s motor vehicles.
Paragraph 5 of the 26 May 2021 proposal addressed the wife retaining her motor vehicle. In paragraph 6 of the arbitration orders the arbitrator ordered the wife to retain her Motor Vehicle 1 with the husband having no interest in it. That much of the arbitrator’s orders was consistent with the 26 May 2021 proposal.
In paragraph 6 of the 26 May 2021 letter the husband proposed each party retaining all personal property standing in his or her own name. The wording of the award was not in the same terms as was the wording used in paragraph 6 of the 26 May 2021 proposal. Instead, in paragraph 6.5 the arbitrator addressed in generic terms that the wife retained all other personal property in the wife’s possession, custody or control as at the date of the award. In paragraph 7.14 the arbitrator addressed in equally generic terms that the husband retained all other personal property in the husband’s possession, custody or control as at the date of the award. In those circumstances, paragraph 6.5 when read in conjunction with paragraph 7.14 of the arbitrator’s orders responded to paragraph 6 of the husband’s proposal in his solicitors’ 26 May 2021 letter.
In paragraph 7 of the 26 May 2021 letter the husband proposed that each was to retain his and her own superannuation entitlements. The arbitrator did not make orders in those terms. Instead, the arbitrator treated the parties’ superannuation entitlements as assets of the relationship which fell for division under s 79. The arbitrator’s examination of the issue was first mentioned at paragraph 89 of the arbitrator’s reasons. At paragraph 254 of his reasons the arbitrator made findings about assets, liabilities and superannuation entitlements. The husband’s superannuation entitlement was $160,685 and the wife’s was $32,156. The parties’ net assets including superannuation was $3,296,206. The arbitrator divided the parties’ net assets including superannuation as to 57.5% to the wife and 42.5% to the husband.
The arbitrator did not make orders in relation to the parties’ superannuation in the manner offered by the husband’s solicitors. To that extent the arbitrator’s treatment of the parties’ superannuation deviated significantly from the proposal in the 26 May 2021 correspondence.
In paragraph 8 of the 26 May 2021 proposal the husband offered that each party was responsible for his and her own debts and liabilities. As with the parties’ superannuation, the arbitrator examined the parties’ assets as well as their liabilities and ultimately made orders dividing net assets in the percentages recorded above. In other words, the arbitrator did not make orders consistent with the proposal in paragraph 8.
The arbitrator did not deal with costs.
The question then became whether the wife had been offered terms more favourable than were ordered.[4] In my view the terms of the 26 May 2021 offer were not more favourable than the wife achieved in the arbitration. Accordingly, the husband should not have the benefit of an order for costs in his favour. The wife’s position was vindicated by her remaining silent in relation to the 26 May offer and pressing on with the arbitration.
[4] Haven & Haven [2020] FamCA 954, Agosti & Agosti [2021] FedCFamC1F 72 and Kyle & Kyle [2022] FedCFamC1F 251.
In paragraph 1 of the husband’s counsel’s submissions dated 27 September 2022 the husband contended that the wife should pay the costs of the proceeding. He so contended in reliance upon several propositions, namely –
(a)the wife brought a case against the husband that should not have been brought or maintained;
(b)the wife’s proceeding was not properly articulated;
(c)the wife’s proceeding could not be maintained;
(d)the wife imprudently did not accept the Calderbank offer made 10 August 2018;
(e)the wife expended wasteful and unnecessary costs in retaining silk and junior counsel throughout the hearing;
(f)the wife expended wasteful and unnecessary costs in seeking to have a single expert appointed to value the property of the second respondent; and
(g)the wife wasted the court’s time in conducting the case in such manner that 14 subpoenae were issued (13 of which were struck out and one was not pressed), bringing a procedural application before the arbitrator that was dismissed and failing on her review application.
It was becoming necessary to address each.
The wife’s suggestion that this proceeding should not have been brought or maintained was not borne out by the upshot of the arbitral award. The wife achieved orders that represented a division of the parties’ net assets in the percentage of 57.5% to the wife and 42.5% to the husband. Without commencing this proceeding it is difficult to see how she could have achieved that outcome. I do not accept the contention of counsel for the husband that the wife brought and maintained a case against the husband and his brother that should not have been brought or maintained.
Counsel for the husband argued that the wife’s case was not properly articulated. The arbitrator seemed to have been able to follow her case as articulated. I am unable to see how the husband demonstrated this proposition. I reject it.
Counsel for the husband put forward the proposition that the wife brought and maintained a case as against the interests of third parties that were not notified or joined to the proceeding (and was subsequently abandoned at submissions before the arbitrator) (his words). No particulars were given of that assertion. It was none too easy to follow that contention. This being an adversarial application,[5] it fell to the husband to make good his submissions on a particular issue. It was not for me to fossick for his contentions and to explore whether they were made out. I reject his assertion.
[5] Air Canada v Secretary of State for Trade [1983] 2 AC 394, 438, Sainsbury's Supermarkets Ltd and others v Mastercard Inc and others (European Commission intervening) [2020] 4 All ER 807 and Al-Medinni v Mars UK Ltd [2005] EWCA Civ 1041.
In the passages already covered above I have addressed whether or not the wife bettered the last-put proposal to resolve this proceeding. In my view she did. I reject the notion that the wife imprudently rejected a Calderbank offer made on 10 August 2018.
Next, the husband argued that the wife expended wasteful and unnecessary costs in retaining senior and junior counsel during the arbitration. In the absence of an order made in pursuance of s 117(2) of the Family Law Act, the wife’s expenses in her retaining silk and junior counsel are her own.
Next, the husband argued that the wife expended wasteful and unnecessary costs seeking to have the expert value the husband’s brother’s property. Several things must be said of that contention. First, the arbitrator made reference to Ms Z’s report in paragraphs 12 and 23 of the arbitrator’s reasons. The arbitrator expressly mentioned his reliance upon Ms Z’s affidavit signed 29 July 2021 (exhibit 26) in paragraph 23 of the arbitrator’s reasons. But the husband’s real point in this contention was that costs were wasted in relation to having Ms Z value the husband’s brother’s property. The husband said nothing of the wasted costs to which he was put in that exercise. For example, no submissions were addressed to how the wife’s application prolonged the arbitration, what steps the husband was forced to take by reason of the steps the wife took, why the husband immersed himself in the process of Ms Z valuing the husband’s brother’s property and why the husband should be heard on the consequences of that activity. I was unable to divine from the husband’s own material how a costs issue may have been enlivened by the activities of the expert in relation to the husband’s brother’s property. To my mind, the issue raised in paragraph 125 and 126 of the arbitrator’s reasons were very much on the periphery of events warranting a costs order.
So far as wasted costs associated with 14 subpoenae were concerned, the husband’s evidence on this issue was found in paragraph 33 of the husband’s affidavit made 15 September 2022. It seems that on 8 August 2017 a case management conference was conducted before a registrar during which the registrar extended the time for the wife to file submissions until 29 August 2017 and then on 14 December 2017, the registrar struck out all subpoeneae issued by the wife.
The husband offered no evidence of the reasoning behind the registrar making orders striking out the subpoeneae. It was not said whether the order striking out the subpoeneae was for formal defects, breadth, inability to serve, want of apparent relevance or some other reason. In the absence of evidence by the husband on those issues I am left wholly uninfromed about why the subpoenae were stuck out. It would not be proper for me to guess. The state of the husband’s evidence on point leaves me in precisely that situation. I am not willing to entertain costs consequences in the face of such imprecise evidence.
In my view, none of the bases urged by or on behalf of the husband in support of his costs application against the wife succeeded.
Husband’s brother’s costs application
The various bases for the application for costs by the husband’s brother recorded in his 15 September 2022 application in a proceeding have been set out above so no useful purpose is served repeating them here.
The husband’s brother’s solicitor’s affidavit made 15 September 2022 was put forward as providing the factual scenarios for the costs applications brought by the husband’s brother. That affidavit formed the evidentiary basis for the submissions advanced by the husband’s brother. It is utile to commence with those submissions.
As is frequently seen in costs applications, rather than stating the proposition pointing to an entitlement to an orders for costs, in the submissions prepared on behalf of the husband’s brother in this case a narration was given against each subsection of s 117(2)(a)-(g). Precisely why that was done was not stated when Fitzgerald v Fish[6] held one only of those subsections need be invoked to support a costs order. Further, by trawling unnecessarily through subsections (and with its corresponding factual matters) that did not bear upon the real basis for the costs application, attention was diverted away from the real basis for the costs application. Doing the best I could to interpret the husband’s brother’s real basis for his costs application, it seemed he was relying on s 117(2A)(c), conduct of the wife. The husband’s brother’s counsel’s submissions proceeded on the basis that in all the circumstances, an order for indemnity costs was just[7] and should be made in this case. Reliance was placed on an array of authorities, some well-worn, others not so.[8]
[6] (2005) 33 Fam LR 123.
[7] In the Marriage of Hogan (1986) 10 Fam LR 681.
[8] In the Marriage of Kohan (1992) 16 Fam LR 245, Smith & Fields [2013] FamCA 505, Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Phillips & Hansford [2020] FamCAFC 28, Worth & Worth (No 2) [2019] FamCAFC 126 and Sfakianakis v Sfakianakis (2019) 59 Fam LR 419.
Counsel for the husband’s brother argued that his client was not a party to the marriage and was instead a third party who was “innocent to the consequences of marriage” (his words). The husband’s brother relied on the decision of Henderson J in Sommer & Sommer[9] where an order for indemnity costs was sought. It is relevant to point up that her Honour declined such an application and ordered instead that each party bear his and her own costs. The husband’s brother’s counsel also highlighted that in Penfold v Penfold[10] the High Court held that the power to award costs involves a wide discretion and the breadth of that discretion is not limited.
[9] [2021] FedCFamC1F 37.
[10] (1980) 144 CLR 311.
In support of his contentions about the wife’s conduct as supporting a costs order, the husband’s brother’s counsel advanced a collection of submissions.[11] Relevantly synthesised they included the following –
(a)the wife joined the second respondent yet the second respondent had sworn in his financial statement made in 2014 that certain real property was held by him on trust for the husband;
(b)by the time the wife made her April 2017 affidavit the wife had available to her certain formal information;
(c)that information revealed the sole shareholder in L Pty Ltd, which shares he held beneficially;
(d)that information also revealed that the second respondent’s shares in M Pty Ltd were held beneficially;
(e)that information further revealed that for the financial year ended 30 June 2013 distributions among beneficiaries of the M Unit Trust included the second respondent; and
(f)the sole shareholder in AA Pty Ltd was L Pty Ltd.
[11] These have been distilled from paragraphs 26-58 of the written of submissions of the husband’s brother’s counsel dated 13 September 2022.
It was put that the documents surveyed in the immediately preceding paragraph were tendered during the arbitration and that any review of those documents would have led a reader thereof, and should have led the wife, to conclude that the relief the wife sought against the second respondent was doomed to fail.
It was also put that the arbitrator made various findings about the wife’s claim against the second respondent. Specifically, the second respondent contended that the arbitrator considered that the main issue in the arbitration was whether the husband had an interest in law or in equity in the various parcels of real property, companies or businesses held by the second respondent personally or through entities associated with him.[12] The second respondent referred to the arbitrator’s findings[13] that the wife’s amended points of claim filed 10 July 2020 provided the wife with an opportunity to specifically set out the basis of her claims yet that document was ultimately of little assistance in identifying the claims the wife sought to advance. The second respondent submitted that the arbitrator found that despite a number of planning meetings calling for careful intense case management[14] and despite the arbitrator’s request of her senior counsel for clarity in respect of precisely what the wife asserted,[15] the wife served submissions at the end of viva voce evidence[16] that ultimately abandoned the relief she had sought since the filing of her initiating application on 13 April 2017 relying instead on the existence of bare trusts.[17] At paragraphs 168 and 169 of the arbitrator’s reasons, the arbitrator recorded the following –
168.While I accept the Wife is a lay witness whose knowledge of legal terms is limited, I reject the submission that the Wife did not have the requisite knowledge or capacity to understand the central elements of the case as it relates to [2 D Street], particularly after having been represented and advised by a firm of solicitors for approximately a decade, and having been involved in many years of contested matrimonial litigation with the Husband.
169. When I asked Senior Counsel for the Wife to identify what, if any evidence, exists that would indicate the Wife's knowledge about the contended beneficial ownership of [2 D Street] apart from the disclosure made by the Second Respondent in his own 2014 Financial Statement, I was not assisted.
[12] Paragraph [32] of the award.
[13] Paragraph [35] and [36] of the award.
[14] Paragraphs [8] and [12] of the arbitrator’s reasons.
[15] Paragraphs [41] and [42] of the arbitrator’s reasons.
[16] Paragraphs [43] of the arbitrator’s reasons.
[17] Paragraphs [44] and [45] of the arbitrator’s reasons.
In paragraph 47 of his counsel’s submissions, the second respondent also complained that five discrete issues supported the making of a costs order. Those were –
(a)seeking a s 128 certificate to enable the second respondent to address errors in his 2014 financial statement and to respond to assertions of the wife;
(b)providing disclosure of documents that tended to contradict assertions by the wife;
(c)making certain documents available to the expert;
(d)paying the single expert; and
(e)applying for the registration of the award.
The second respondent contended that taken in aggregate, those factors supported a costs order against the wife, such costs to be assessed on an indemnity basis.
The second respondent also relied on s 117(2A)(e), that is to say, he argued that the wife had been wholly unsuccessful. He submitted –
(a)the arbitrator dismissed the relief sought by the wife in her initiating application filed 13 April 2017, her points of claim, her amended points of claim and the minute handed up on the last day of the arbitration;
(b)the arbitrator did not find as the wife contended that the husband had an interest in any property owned by the second respondent; and
(c)the wife was wholly unsuccessful in the review application.
The wife’s opposition to the husband’s costs application and the second respondent’s costs Application
Written submissions were prepared on behalf of the wife by her counsel and dated 14 September 2022. In those submissions her counsel chose to address the subsections of s 117(2A) rather than joining issue with the points addressed by the husband and by the second respondent. Further, the wife’s counsel invoked various subsections of s 117(2A) in support of her own application for indemnity costs. Having regard to the fact the wife did not join issue with the propositions advanced by the husband and by the second respondent in respect of their own costs applications, it serves no purpose to attempt to put whatever case she may have had at her disposal to meet those respondent’s costs applications.
The wife’s own costs applications
Paragraphs 1 to 4 of the wife’s application in an arbitration dated 14 September 2022 was in the following terms –
1.That the Respondent Wife to this Application (the Applicant in the substantive proceedings) pay the Second Respondent's costs of and incidental to the proceedings commenced on a party/party basis.
2.In the alternative, that the Respondent Wife to this Application (the Applicant in the substantive proceedings) pay the Second Respondent's costs of and incidental to the proceedings on 13 April 2017 on an indemnity basis.
3.That the Respondent Wife pay the Second Respondent's costs of and incidental to the Application for Review filed on 3 June 2022 on a party/party basis or, alternatively, on an indemnity basis.
4.That the Respondent Wife pay the Applicant's costs of and incidental to this Application.
The wife’s solicitor, James Jordan, made an affidavit in support of the wife’s costs applications. In that affidavit, Mr Jordan deposed to the following –
(a)the fees of Mr Y totalled $190,135;
(b)junior counsel’s fees were $89,567.50;
(c)the wife’s solicitor’s fees were $272,702.17;
(d)disbursements totalled $55,441.47;
(e)the total of those sums was $697,846.14; and
(f)those costs and disbursements did not include the costs of the review.[18]
[18] Paviello & Paviello [2022] FedCFamC1F 592.
The wife’s counsel focused on the husband’s conduct, especially in relation to his non-disclosure, as supporting an order in her favour against him in relation to costs. The wife’s counsel also focused on s 117(2A)(e) of the Family Law Act and whether the husband or her had been wholly unsuccessful.[19]
[19] She called in aid authorities such as Anison & Anison [2019] FamCAFC 108, Bant v Clayton (Costs) (2016) 56 Fam LR 31 and In the Marriage of Higginbotham & Robinson (1991) 14 Fam LR 559.
Taking first the last point, counsel for the wife argued that it could not be said that any party had been wholly unsuccessful. As against the husband the wife submitted that the award in her favour was 7.5% greater than the equal division of the asset pool contemplated at the commencement of the proceeding. So far as the second respondent was concerned, the wife’s counsel submitted that the second respondent was found to have been a financial resource available to the husband and that such a finding could not have been made or attempted (his words) without the joinder and evidence of the second respondent. The wife contended that two paragraphs of the arbitrator’s reasons ([300.22] and [304]) supported that submission. Those paragraphs were in the following terms, respectively –
300.22Having regard to the authorities citied above, and in circumstances where it is apparent to me from the late disclosure of the Husband's ownership of four [motor vehicles] worth almost a quarter or a million dollars without reference to how such assets were acquired and the limited evidence as to what might be the Husband's entitlement to income from all other sources including but not limited to the [R Trust], that there is nondisclosure on the part of the Husband of the true extent of his income and his access to financial resources. Where I cannot comfortably make a finding about what is the Husband's income amount from all sources, and where I cannot say with any certainty what benefit might flow to the Husband via the [R Trust] and/or via the Second Respondent in the future, I will not be unduly cautious in my assessment of relevant factors pursuant to Section 75(2) of the Act.
…
304.Having regard to my consideration of the relevant factors referred to at Section 75(2) of the Act as set out above, my findings about the pool of divisible property and my assessment of contributions, I am persuaded in this matter to make a 7.5% adjustment in the Wife's favour.
Neither of those paragraphs provide support for the wife’s submission that the arbitrator found that the second respondent was a financial resource for the husband. To the contrary. The arbitrator stated that he was unable to say what was the husband’s income from all sources. Far from that being an explicit finding, as the wife’s counsel submitted in paragraph 71 of his submissions, it was wholly erroneous to submit that either paragraph was to be so construed.
Consideration of the husband’s costs applications
Paragraph 1 of the husband’s application in a proceeding related to his claim for payment of a fixed sum in the amount of $450,000 being the husband’s costs of and incidental to –
(a)the wife’s application filed 13 April 2017;
(b)the wife’s review application following arbitration; and
(c)this costs application.
That paragraph of the husband’s application was headed “the entirety of the proceedings”.[20] It was the husband’s attempt to procure an order that the wife pay him $450,000 for his costs of the whole litigation from the commencement of this proceeding to the review application following the arbitration to this costs application.
[20] Reference to “proceedings” (in the plural) was erroneous. One only proceeding was involved in this case so the heading should have been in the singular.
Before revealing my path of reasoning for my conclusion to refuse that application, it is utile to observe that the sum claimed of $450,000 was ambit in nature, unparticularised and bore all the hallmarks of an amount properly characterised as indemnity costs, that is to say, the figure appeared to represent full recompense for the husband’s legal expenditures. No attempt was made by the husband to break the amount of $450,000 down into component parts by which it was possible to ascertain whether and to what extent a particular amount claimed related to a particular activity and whether the sum sough for that activity was reasonable in the circumstances. The sum of $450,000 is remarkably large, approximately half a million dollars in circumstances where the pool, as found, was approximately $3 million. In any event, it would be disproportionate and unjust to order one party to pay the other’s costs of $450,000 in a case involving a pool of approximately $3 million. I refuse to make an order in those terms.
It then became necessary to examine the grounds on which the husband said he was entitled to an order for his costs to be paid by the wife.
The first related to the husband’s offer of compromise. It will be recalled that he proposed that the wife was to be paid 60% of the net proceeds of sale of the Suburb P property and that each party retained motor vehicles, personal effects and superannuation. The arbitrator made orders that included superannuation and the net proceeds of the Suburb P property, ordering the wife to receive 57.5% thereof and the husband receive 42.5%. When properly construed the upshot of the arbitration was not more favourable to the husband than were the terms of his 26 May 2021 proposal to settle the litigation. He is not therefore entitled to a costs order in his favour on the basis that the wife imprudently refused to accept his 26 May 2021 proposal.
Next, the husband sought his costs for the reasons recorded in paragraph 1 of his counsel’s submissions dated 27 September 2022. In the passages above commencing at paragraph 31 I have addressed those contentions. In essence, I take the view that –
(a)there is no merit in the husband’s argument that the wife brought a case that should not have been brought or maintained;
(b)whether to the husband’s way of thinking the wife’s case was properly articulated is largely beside the point as the arbitrator was able to adjudicate upon the matters and to deliver his award;
(c)there is no merit in the husband’s argument that the proceeding could not be maintained;
(d)there is no merit in the husband’s argument that the wife imprudently refused to accept his Calderbank offer;
(e)there is no merit in the husband’s argument that the wife was wasteful in retaining silk and junior counsel because her choice of counsel was very much a matter for the wife (it had nothing whatsoever to do with the husband);
(f)there is no merit in the husband’s argument that the wife expended costs in procuring the single expert to value the second respondent’s property because a live issue in the case related to the interest held by the husband in the second respondent’s property and if the arbitrator had found that the husband did in fact have some form of legal or equitable interest in that property, it was relevant to know the value of any such legal or equitable interest; and
(g)there is no merit in the husband’s argument that he is entitled to a costs order by reason of the fact that a number of subpoenae issued by the wife were struck out, any more than the husband would be entitled to a costs order by reason of some evidentiary objection being upheld adversely to the wife.
The husband’s application in a proceeding dated 15 September 2022 put forward in paragraph 2 a variety of costs applications. They varied as to relevant dates and bases for the making of the order. Some included the specific sum of $400,000. It is necessary to make certain observations about the husband’s applications.
First, no basis whatsoever was shown for an order for indemnity costs to be ordered in the husband’s favour. Exceptional circumstances were not shown. None of the matters addressed in paragraph 31 (a)-(g) above revealed anything exceptional, even if “exceptional” means as Kiefel J held in Hatcher v Cohn,[21] namely, out of the ordinary.
[21] (2004) 139 FCR 425.
Next, the sum of $400,000 is ambit – it was unquantified. Its evidentiary provenance was unsubstantiated. It represented little more than a wish-list amount.
Next, the husband proposed costs being ordered in his favour on what he called “an ordinary basis”. By that he meant that he proposed an order requiring the wife to pay his costs of the proceeding or for a discrete portion of the proceeding on a party/party basis.
Again, several things must be said of that proposal. First, even an order for one party to pay the costs of another party on a party/party basis requires a jurisprudential basis, grounded in s 117(2) for one of the enabling bases found in s 117(2A)(a)-(g). Even if a costs applicant successfully invoked one of those subsections, a costs order does not follow axiomatically. Costs orders remain in the discretion of the judge. Ordinarily, each party bears his and her own costs under s 117(1).
In this case I was not persuaded that the husband made out any ground under s 117(2A)(a)-(g). This was a hard-fought case. The wife encountered problems casting her case. The husband presented obstacles in his defective disclosure. Ultimately, the arbitrator did the best he could by producing a comprehensive award with carefully considered reasons. The wife failed in her review application. I take the view that the husband should not have his costs paid by the wife, whether on an indemnity basis or at all.
It follows that I dismiss paragraphs 1 and 2 of the husband’s application in a proceeding.
Paragraph 3 of the husband’s application related to two discrete matters in the conduct of the arbitration. The first was the subject of the arbitrator’s interim award dated 15 March 2021. The second related to the costs of the expert Ms Z. Each had a factual setting which must be narrated to better understand the upshot of the costs application in relation to each.
The document marked as “BB 16” exhibited to the affidavit of Ms BB affirmed 15 September 2022 was the written record of the arbitrator’s determination about the first issue canvassed in paragraph 3 of the husband’s application in a proceeding. The question determined by the arbitrator related to the wife’s application for leave to rely on the affidavit of Mr CC sworn 7 December 2020. The arbitrator dismissed the wife’s application giving reasons that spanned 79 paragraphs, also dated 15 March 2021. Several matters of importance emerged from those reasons. They may be distilled as follows –
(a)the application the subject of the ruling arose on the fifth day of the arbitration, it having run on 9, 10, 11, 12 and 13 November 2020, standing adjourned, part heard;
(b)by that stage the wife’s evidence had been given and, subject to the issue concerning Ms Z, the wife had closed her case;
(c)by 13 November 2020 the husband was being cross-examined;
(d)the arbitrator was requested to rule on the wife’s application to re-open her case so as to adduce evidence from Mr CC in his 7 December 2022 affidavit;
(e)if leave were granted, the question became whether documents could be provided to Ms Z;
(f)debate before the arbitrator was heard on 16 February 2021;
(g)the documentation for which leave to re-open was sought related to whether the husband had any proprietary interest in the M Pty Ltd entity;
(h)the respondents opposed the grant of leave;
(i)the wife contended the material in Mr CC’s affidavit went to the husband’s credibility, was highly probative and a denial of natural justice[22] would arise unless the wife were granted the leave she sought;
(j)applying all relevant authorities[23] the arbitrator took the view that the wife offered no explanation why Mr CC’s evidence was not adduced earlier and that the arbitrator was left wondering whether the wife’s late re-opening application was an attempt to overcome a defect in the wife’s case or an attempt to admit evidence that may have otherwise been omitted by inadvertence;
(k)the arbitrator said the wife bore the onus of leading all relevant evidence and persuading the arbitrator;
(l)without knowing what Mr CC meant by his assertion that “certain persons were involved in something when M Pty Ltd was incorporated”, the arbitrator was not much assisted by aspects of Mr CC’s evidence;
(m)as counsel for the husband’s brother submitted, the arbitrator accepted the submission that portions of Mr CC’s evidence would be unlikely to survive a challenge to admissibility; and
(n)the arbitrator found that Mr CC himself shed no light on the provenance of the documentation he exhibited to his affidavit.
[22] In current parlance the phrase “natural justice” has been eclipsed by the phrase “procedural fairness” as was held in Allesch v Maunz (2000) 203 CLR 172, Taylor v Taylor (1979) 143 CLR 1, 4, 16; Re JRL, ex parte CJL (1986) 161 CLR 342, 350, Dick v Piller [1943] KB 497, 499, Grimshaw v Dunbar [1953] 1 QB 408, 412 and International Finance Trust Company Ltd v New South Wales Crime Commission (2009) 240 CLR 319 (at [54]).
[23] In the Marriage of Gelley (No 2) (1992) 15 Fam LR 483, Summit v Summit [2009] FamCA 365, Smith v New South Wales Bar Association (1992) 176 CLR 256, Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471, EB v CT (No 2) [2008] QSC 306 and Reid v Brett [2005] VSC 18.
In the upshot, the arbitrator took the view that he was not going to be able to do justice between the parties if he acceded to the wife’s application for leave to rely on the affidavit of Mr CC. Additionally, the arbitrator took the view that real and significant prejudice would befall the respondents if leave to re-open were granted in terms of the future conduct of the arbitration.
The husband submitted that the wife should pay his costs in respect of the arbitrator’s refusal to grant leave to the wife to re-open her case. The arbitrator said nothing about costs in his reasons or orders.
It was undeniable that the wife failed in her application to re-open. Any consideration of costs therefore fell to me as part of the costs of the proceeding. I see no reason to separate the discrete issue of the re-opening aside from the costs of the proceeding generally. Had costs of the re‑opening application been reserved, then those costs wold have been determined by the overall determination of costs of the proceeding. As has already been reasoned, in my view the husband is not entitled to an order requiring the wife to pay his costs of the proceeding. This discrete application forms part of that general observation. While the wife failed in her re-opening application, she nevertheless obtained orders for the net assets to be divided as to 57.5% in her favour. It is not just[24] for her to pay the husband’s costs of this proceeding.
[24] In the Marriage of Hogan (1986) 10 Fam LR 681.
The second application in paragraph 3 of the husband’s application in a proceeding dated 15 September 2022 related to the husband’s share of Ms Z’s costs in responding to Ms Z’s requests for information.
That expense is a cost in the proceeding.
In the absence of an order making provision for that expense to be met in a manner differently to the manner in which the expense was in fact met, the payment will not be adjusted.
I see no basis for ordering the wife to pay for Ms Z’s fees. The husband did not provide a sound one.
Paragraph 3 of the husband’s application in a proceeding is dismissed.
In paragraph 4 of the same application in a proceeding the husband sought payment by the wife of his costs of the wife’s failed review application. He sought those costs on an indemnity basis or if not on that basis, on a party/party basis.
The wife failed in her review application. She was “wholly unsuccessful” in respect of it. Her grounds of review were not “questions of law” as s 13J of the Family Law Act requires. She failed to demonstrate the existence of fraud for the purposes of s 13K of the Family Law Act. She was amenable to a costs order under s 117(2A)(e).
The wife made no specific submissions about which s 117(2A)(e) would not operate in such manner as to point to a costs order being made against the wife. Instead, in a broad-based manner the wife argued that the husband had wholly failed to comply with his duty of disclosure with the consequence that he arbitrator misdirected himself on the proper outcome that was in all the circumstances just and equitable. I dismissed her challenges to the arbitral award.
To my mind, the wife’s failure on the review application meant she was “wholly unsuccessful” in her review application. The husband was forced to oppose the review application. He did so successfully. Is it just that a costs order is made against the wife in those circumstances? In my view it is. In her review application she failed to engage s 13K. She was re-running her arguments about the husband’s dereliction of duty concerning disclosure in circumstances where the arbitrator had addressed those disclosure issues by –
(a)adopting a robust approach towards the determination of the s 79 application in accordance with certain authorities that included In the Marriage of Weir[25] and Chang v Su;[26] and
(b)adding a loading to the overall percentage division.
[25] (1992) 16 Fam LR 154.
[26] (2002) 29 Fam LR 406.
In my view that was entirely appropriate.
The wife should pay the husband’s costs of the review application. But there was nothing in the nature of exceptional circumstances about her failed review application such as to warrant an order that the wife pays those costs on an indemnity basis. The husband’s costs of and incidental to the wife’s failed review application must be assessed by a registrar on a party/party basis and when assessed, paid by the wife within 90 days of the order by the registrar of this court assessing those costs.
Finally, the husband sought costs of this costs application. He was largely unsuccessful in relation to it. He succeeded only in obtaining an order that the wife pays his party/party costs of the wife’s failed review application. All other applications by him failed. In most, he had no proper basis to seek costs on an indemnity basis. In those circumstances I am of the opinion that the husband’s costs of and incidental to this costs application must be borne by him under s 117(1) of the Family Law Act.
By way of conclusion in relation to the husband’s costs applications, the husband’s costs of all aspects of this litigation are his own costs under s 117(1) other than his costs of the wife’s failed review application in which case the wife must pay those on a party/party basis.
The second respondent’s costs
The second respondent’s principle application was for an order that the wife pay his costs of the proceeding on a party/party basis.
In essence, the second respondent put up the argument that he should not have been joined as a party to the proceeding. That was because, so he contended, the wife knew at all times that her claims against the second respondent were not maintainable.
Stepping back from the specific issues raised by the second respondent, it must be at once acknowledged that while the wife encountered real difficulties articulating and pleading her case, she was asserting that the husband had at least an equitable interest in one or more parcels of real estate owned by the second respondent. The second respondent was potentially affected by any such order. He was a necessary party to the proceeding therefore. The arbitrator made various observations about the manner in which the wife advanced her case against the second respondent. In the end, no order was made by the arbitrator in relation to the second respondent.
Counsel for the second respondent argued that the wife’s case against the second respondent was hopeless.
I do not agree that the wife’s case against the second respondent was hopeless. It may have been poorly pleaded. If the wife had been able to sheet home to the second respondent that the husband had some form of equitable interests in the second respondent’s property, then orders may well have been appropriately made against the second respondent. As it happened, the wife failed in that regard.
The philosophy underpinning s 117(1) of the Family Law Act is that the provision is subject to s 117(2), s 45A(6), s 70NFB(1), s 117(AA) and s 117AC, namely that each party shall bear his or her own costs. The second respondent was a party rendering s 117(1) applicable to him.
I take the view that even if an applicant failed against a respondent, s 117(1) applies. The imposition of indemnity costs, as sought by the second respondent in paragraph 2 of his application in a proceeding, is intended for exceptional circumstances. Failing to prove the existence of an equitable interest in property does not amount to exceptional circumstances.
And even if one of the subsections of s 117(2A) is enlivened, it does not follow that a costs order axiomatically flows, as I said above.
The wife may well have harboured suspicions that the husband and his brother had joined in a concerted effort to stymie the wife’s s 79 application. Her suspicions may well have been heightened by the stunning absence of documentation by the husband. Her suspicions may well have been heightened by the fact that the second respondent put the husband in funds to meet the costs of Ms Z. Whether those suspicions drove the wife to persist in her claims involving the second respondent is beyond the evidence and the arbitrator’s findings. The wife endeavoured to prove her case insofar as it related to the husband. She retained silk and junior. She sought leave to re-open her case after it was closed. In the end she was unsuccessful. But that does not mean that axiomatically the second respondent became entitled to costs. He did not.
In my view, the second respondent must bear his own costs of this proceeding.
But the second respondent’s costs of and incidental to the wife’s failed review application fall into to a different category. For reasons largely similar to those in relation to the husband’s costs of the wife’s failed review application, insofar as the second respondent was concerned, so too must the wife pay those but not on an indemnity basis and instead on a party/party basis.
The second respondent failed to obtain an order that his costs of and incidental to the proceeding be paid by the wife. However he succeeded in obtaining an order that the wife pays his costs on her unsuccessful review application. In those circumstances it is not just[27] that the wife pays the costs of the second respondent of and incidental to the costs application.
[27] In the Marriage of Hogan (1986) 10 Fam LR 681.
Accordingly, I dismiss paragraphs 1, 2, and 4 of the second respondent’s application in a proceeding.
The terms of orders in respect of paragraph 3 have already been set out.
The wife’s costs applications
The wife sought an order for the first and second respondent to pay her costs of the arbitration on an indemnity basis.
Alternatively, she sought an order that the respondent pay her costs of the arbitration on a party/party basis.
She also sought an order that each party bear her and his own costs of the review application.
Taking the last application first, I refuse it. The reasoning set out above reveals my thought process.
As to the first two paragraphs of the wife’s application in an arbitration dated 15 September 2022, I also refuse those applications. Taking first the application for indemnity costs, no exceptional circumstances exist so as to attract the learning in this court on indemnity costs. As for the application for an order requiring the respondents to pay the wife’s costs of the arbitration, the submissions recorded in the wife’s counsel’s written submissions dated 14 September 2022 advanced propositions about costs generally yet they offered no persuasive reasons why I should make an order for the respondents to pay the wife’s costs of the arbitration, whether on a party/party basis or at all. There are good reasons why such an order should not be made including the manner in which the case was poorly pleaded and the manner in which claims were put forward but not proved. In my view it would not be just to make the order sought in paragraph 2 of the wife’s application in an arbitration.
Each party’s costs in the proceeding including in the arbitration must be that party’s own costs, except insofar as those costs involve the review application, in which case the wife must pay the respondents’ costs of and incidental to the wife’s failed review application on a party/party basis.
I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 24 October 2022
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