Pearce & Pearce (No 5)
[2023] FedCFamC1F 761
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Pearce & Pearce (No 5) [2023] FedCFamC1F 761
File number: SYC 2654 of 2017 Judgment of: CAMPTON J Date of judgment: 5 September 2023 Catchwords: FAMILY LAW – COSTS – Costs applications subsequent to two trial events – Where the parties have been engaged in litigation for more than four years and have each had mixed success in prosecuting their relief – Where the circumstances do not justify a departure from the ordinary position that parties meet their own costs of proceedings – Costs applications dismissed. Legislation: Family Law Act1975 (Cth) ss 79, 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.04
Cases cited: Pavlic & Pavlic (No 2) [2023] FedCFamC1A 97
Pearce & Pearce (No 2) [2022] FedCFamCF1 193
Pearce & Pearce (No 3) [2022] FedCFamC1F 418
Pearce & Pearce (No 4) [2023] FedCFamC1F 525
Division: Division 1 First Instance Number of paragraphs: 49 Date of hearing: 1 September 2023 Place: Sydney The Applicant: Did not participate Solicitor for the Respondent: Ms Morozov, Barkus Doolan Winning Counsel for the Intervener: Mr Stapleton Solicitor for the Intervener: Watts McCray ORDERS
SYC 2654 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR PEARCE
Applicant
AND: MS PEARCE
Respondent
MS R PEARCE
Intervener
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
5 SEPTEMBER 2023
BY CONSENT THE COURT ORDERS THAT:
1.The husband’s Application in a Proceeding filed 8 August 2022 together with the Wife’s Response to an Application in a Proceeding filed 9 May 2023 be withdrawn and dismissed.
2.Paragraph 2 of the wife’s Application in a Proceeding filed 18 July 2023 together with the husband’s Response to an Application in a Proceeding filed 1 August 2023 be withdrawn and dismissed.
3.There be no order as to costs as between the husband and the wife.
ON A DEFENDED BASIS THAT:
4.The intervener’s Application in a Proceeding filed 20 June 2022 be dismissed.
5.The balance of the relief sought in the wife’s Application in a Proceeding filed 18 July 2023 be dismissed.
6.Order 24 as to security for costs made 4 July 2023 is discharged.
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 Pearce & Pearce has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
These reasons determine costs applications subsequent to two trial events between Mr Pearce (“the husband”), Ms Pearce (“the wife”) and Ms R Pearce, who is the husband’s mother (“the intervener”), following which final orders were made:
(a)On 10 June 2022 (see Pearce & Pearce (No 3) [2022] FedCFamC1F 418 (“the discrete issues reasons”)), determining a discrete issue as to the intervener’s application to recover three advances of monies. The first advance of $751,244 was made in August 2014, the second of $200,000 was made in January 2016, and the third of $100,000 was made in October and November 2018. The intervener contended:
(i)the first and second advances (totalling $951,244) were made to both the husband and the wife; and
(ii)they were to be repaid from the proceeds of sale of real properties owned by the husband and wife held in their joint bank accounts, in priority to those funds being adjusted pursuant to s 79 of the Family Law Act1975 (Cth) (“the Act”); and
(b)On 4 July 2023 (see Pearce & Pearce (No 4) [2023] FedCFamC1F 525 (“the property adjustment reasons”)), determining the balance of the relief sought by the intervener that was not determined at the discrete issues hearing and concluding the dispute between the husband and wife as to property adjustment pursuant to s 79 of the Act.
These reasons assume familiarity with each of the above judgments.
The competing relief sought as to costs
The intervener filed an Application in a Proceeding on 20 June 2022 (“the intervener’s costs application”) seeking that the wife pay the costs of her Response to an Initiating Application filed on 13 March 2020, in the following terms:
1.1 On the ordinary basis in a fixed lump sum amount of $215,000.00.
1.2 Alternatively, on the ordinary basis, as agreed or assessed.
By the time of the hearing of the intervener’s cost application, the quantum of costs sought in a fixed sum was reduced to $140,000. The intervener also sought an order that the wife pay her costs of the costs application fixed in the sum of $12,000.
The husband filed an Application in a Proceeding on 8 August 2022, seeking (on the same basis identified by the intervener) that the wife pay his costs arising from the intervener’s Response to an Initiating Application filed on 13 March 2020, in the sum of $65,331.60 or alternatively, as assessed (“the husband’s costs application”).
The wife filed two Responses to an Application in a Proceeding on 9 May 2023. She sought that each of the husband and the intervener’s costs applications be dismissed.
The wife filed an Application in a Proceeding as to costs on 18 July 2023 (“the wife’s costs application”), seeking:
1. That the [intervener] pay one-half of the wife’s costs in relation to the Response to Initiating Application filed 13 March 2020 by the [intervener] on a party/party basis as agreed or assessed, to include the costs of this application.
2. That the husband pay the wife’s costs from the commencement of the proceedings (but excluding costs relating to the parenting proceedings) on a party/party basis as agreed or assessed, to include the costs of this application.
The intervener filed a Response to an Application in a Proceeding on 25 August 2023 seeking that that wife’s costs application be dismissed and the wife pay the intervener’s cost of the costs applications. The husband did not file a Response to the wife’s costs application.
BACKGROUND
Broadly, the discrete issues reasons delivered on 10 June 2022 made findings that:
(a)The intervener and the husband alone (not the husband and the wife) entered an agreement for the intervener to provide the first advance to the husband and wife to complete the purchase of real property, and for those funds to be repaid upon the wife obtaining employment and the property being refinanced. The advance did not carry interest (at [143]);
(b)The first advance was repayable upon satisfaction of terms and thereafter on demand (at [148]);
(c)In his dealings with the intervener in relation to the first advance, the husband was negotiating for access to funds for the benefit of both he and the wife, not as agent of the wife, however the wife had knowledge of and encouraged the husband in so negotiating (at [139]);
(d)The intervener failed in her contention that the first advance was secured upon the real property of the husband and the wife by way of security or charge. The advance was secured only on the husband’s half share of the proceeds of sale of a real property owned by the husband and wife. That security was by way of a charge given by the husband alone on 1 February 2019 (being after separation) (at [168] and [172]);
(e)It would be unconscionable to permit the husband and wife to depart from the husband’s promise to repay the first advance, and to retain all the benefit of it (at [180]–[182]). An order was made that the husband and the wife do all things as necessary to pay the intervener the sum of $751,244 (i.e. the first advance) from the joint NAB bank accounts of the husband and the wife which held the proceeds of sale of their real properties. Those accounts had a balance of $1,257,879 at the time of the discrete issues trial (at [172]);
(f)The second advance of $200,000 was made by way of loan from the intervener to the husband alone (not to the husband and the wife). It did not carry interest. The intervener failed in her contention that the advance was secured or charged on the real property of the husband and the wife. The fact of recovery of the advance and as to the priority of that recovery if achieved were matters to be determined in the substantive s 79 trial (at [193]);
(g)At the discrete issues trial, the intervener abandoned her relief as to recovery of the third advance of $100,000 (at [79]).
A further order was made that the costs of all parties of and incidental to the Response to Initiating Application filed by the intervener on 13 March 2019 be reserved.
The property adjustment reasons delivered on 4 July 2023 made findings as to the husband’s significant disclosure failures, as to each of the husband and wife’s contributions and as to the factors warranting adjustments from the contribution findings. Relevantly, findings were made that it is more likely than not that the second advance (of $200,000) would have not been called upon by the intervener to be repaid if not for the s 79 proceedings (at [194]). The second advance did not form a liability in the pool identifying the property of the husband and the wife at trial. The husband committed to repay that advance from his share of any property adjustment. The intervener’s relief for the second advance to be repaid in priority to funds being paid to the wife was refused.
The orders made on 4 July 2023 adjusted the superannuation interests of the husband and the wife, adjusted the balance of the proceeds of sale of real properties held in their joint bank accounts (being reduced to $514,559 at the time of the s 79 trial after repayment of the first advance and some other deductions) in the wife’s favour, and those funds held in the trust account of the wife’s solicitor adjusted in the portion of $18,455 to the wife and $2,066 to the husband. Orders were made as to non-periodic child support departure payable by the husband to the wife and declaring child support arrears payable by the husband to the wife of $45,000 as at 22 May 2023. The Child Support Agency subsequently garnisheed the $2,066 due to the husband from the trust account of the wife’s solicitor. It is yet to remit it to the wife.
Further, on 4 July 2023 the following order was made:
24.By way of security for costs, simultaneously on compliance with Order 1(b) hereof, the wife shall do all such acts and things as may be necessary to pay the amount of $170,000 to the Barkus Doolan Winning trust account to be held in such account pending the determination of the intervener’s Application in a Proceeding for costs filed 20 June 2022 and the husband’s Application in a Proceeding for costs filed 3 August 2022.
Each of the intervener, the husband and the wife’s costs applications were listed for hearing on 1 September 2023.
Compromise of the competing costs application as between the husband and the wife
On 23 August 2023, the husband and wife provided by joint email to chambers a Minute of Order reflecting the consent position they had reached to resolve each of their costs applications against one another. The intervener was not a party to that Minute of Order. In the circumstances, the Minute was marked as Exhibit A in the hearing of this costs applications and the following order was made in chambers on 23 August 2023:
2.Subject to providing the intervener with the opportunity to be heard on 1 September 2023 as to why the proposed consent orders as between the husband and the wife in accordance with Exhibit A ought not be made, save objection it ought to be anticipated that orders will be made in accordance with paragraphs 1, 2, and 3 of Exhibit A on 1 September 2023, such that as to all issues of costs between the husband and the wife will be compromised and finalised.
At the hearing before me, the intervener indicated that she had no objection to orders in terms of Exhibit A being made by consent. Those orders will be made, and accordingly the husband’s costs application will be dismissed, as will paragraph 2 of the wife’s costs application (as recorded at [7]) above.
The remaining costs issues for determination
The outstanding disputes are whether the wife should pay the intervener’s costs, and/or whether the intervener should pay the wife’s costs and if so, on what basis should costs be calculated.
THE DOCUMENTS RELIED UPON
The intervener relied upon the following:
·Her costs application filed 20 June 2022;
·Her Response to the wife’s costs application filed 1 August 2023;
·Her Case Outline filed 25 August 2023 (Exhibit B);
·Her affidavits filed 20 June 2022 (including annexures and exhibits) and 25 August 2023;
·A tender bundle of invoices filed 25 August 2023 (Exhibit D); and
·A “Bill of Costs” prepared by her solicitors filed 1 September 2023 (Exhibit E).
The wife relied upon the following:
·Her costs application filed 18 July 2023;
·Her Response to the intervener’s costs application filed 9 May 2023;
·Her Case Outline filed 25 August 2023 (Exhibit C); and
·Her affidavits filed 18 July 2023 (including annexures and exhibits) and 23 August 2023.
THE LAW AND CONSIDERATION
Applications for costs in this Court are the exception to the rule. While the starting position established by s 117(1) of the Act is that each party pays their own costs, s 117(2) permits the Court to make such orders as to costs as it considers just, if there are circumstances which justify it doing so. In considering what order for costs, if any, should be made, the Court is required to have regard to the matters set out in s 117(2A) of the Act insofar as they are relevant.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs.
The matters relevant to determining what order, if any, should be made for costs are set out in s 117(2A) of that section. The Court may give such weight as it considers appropriate to any relevant factor. It is well settled that no single factor in s 117(2A) has priority, nor must more than one factor be satisfied. Rather, any one factor may be sufficient. I shall make reference to such of those matters as are relevant and engaged here.
The Full Court has described the discretion conferred by s 117 of the Act as being a “broad” one, and held that the factors set out in s 117(2A) are not to be read in a restrictive way. It has made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.
For the purpose of my consideration of the applications for costs, a series of determinations are required:
(a)First, whether circumstances exist which justify departing from the position that each party pay their own costs and the making of a costs order in favour of a party; and if so,
(b)Second, on what basis should costs be paid, be it party and party, or indemnity, or some other basis and whether the costs are to be fixed or to be agreed or assessed.
Has either the intervener or the wife established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in their favour?
The value of fees paid by the intervener in respect of these proceedings is in the range of $230,000. The value of fees paid by the wife, arising from the proceedings (including parenting, financial and child support departure disputes), is in the range of $544,000. The wife gave no evidence and made no submission as to even a broad range of the value of the costs she sought the intervener pay.
The intervener is retired and 77 years of age. She has real property and superannuation valued in the range of $3.7 million and cash of $1.2 million. Her income is generated by her assets.
As recorded in each of the earlier judgments identified in these reasons, the intervener was unlikely to call upon the $200,000 she advanced to the husband (the second advance), she has not attempted to recover the $100,000 advanced to the husband post-separation (the third advance), and it emerged during the course of the litigation that she provided to the husband a further $1 million. She has not called upon an additional advance of $200,000 to her daughter for repayment. Her assets of $4.9 million do not include these items.
The property adjustment reasons find that the wife is employed by NN Company receiving income in the range of $8,579 per week, or about $447,000 (including bonuses) per annum (at [16]). She has not attended her employment since mid-2022. Her current evidence records that her existing income entitlements while she remains away from her place of employment will expire in late 2023. She has made an application for an income protection payment of 70 per cent of her current income. The prospects of success of that application are unknown.
The wife received the sum of $535,056 from the husband and wife’s joint bank accounts pursuant to the s 79 verdict and the benefit of a superannuation splitting order so that her superannuation now has a value of $1,205,133. She is 39 years of age and is unlikely to be able to access her superannuation for some time. Of the controlled monies received, she has paid $249,067 by way of outstanding legal costs and $105,322 by way of credit card debt and a liability to the Australian Taxation Office. This left an amount of $180,667, of which $170,000 is subject to the security for costs order and remains held in her solicitors’ trust account. She retains about $9,000 in savings. The wife still has outstanding other loans of $60,000.
Should the intervener’s costs application be successful, the lion’s share of the wife’s cash non‑superannuation property will be consumed.
The wife has the primary care of the two children of the marriage, who are aged 12 and 10 years. X’s mental health challenges were the subject of findings in the proceedings. He was recently hospitalised after an incident. He is currently being home-schooled while inquiries are progressed for him to attend a specialised educational facility. X’s mental health presentation has deteriorated from that as recorded in the property adjustment reasons. This has impacted on the wife’s capacity for employment as X now requires her greater availability to meet his day-to-day needs. Y is also now presenting mental health symptomology’s and may be confronting challenges by way of ADHD, anxiety, and depression. She is currently school refusing.
The husband is not paying any periodic child-support to the wife. He is not complying with the orders made on 4 July 2023 as to non-periodic child-support. The child support arrears remain outstanding. The husband has commenced litigation as to contravention of the final parenting orders made 28 November 2019 and as to variation of those orders.
There was a submission made on behalf of the intervener that it is difficult to compare the financial circumstances of the intervener and the wife. I do not accept that submission. At present the financial circumstances of the intervener are substantially superior to those of the wife. The current circumstances of the children adversely impact not only on the wife’s capacity for self-support, but consistent with her affidavit evidence, generate additional medical and therapeutic expenses that she alone is currently funding.
All of the above considerations favour of the wife.
The intervener’s submissions accurately record that in respect of the first advance, a number of adverse findings about the conduct of the wife’s defence were made in the discrete issues reasons they were:
(a)at [91]: The effect of which the wife’s evidence became confused and disassembled; and her understanding being largely unsupported by the documentary evidence;
(b)at [97]: the wife’s case strongly and firmly asserted was not reasonably available to her;
(c)at [100]: there was a vacuum in the wife’s case; in the difference between her conviction that the first advance was a gift while she know at the time, they needed to borrow money from the intervener that they would have to repay her;
(d)at [102]: the wife’s contention about the first advance was absent credible foundation and was unsound; and
(e)at [180] and [181]: the position adopted by the parties to the marriage contained “unconscionability” or was “unconscionable”.
Each of these findings are considerations in favour of the intervener’s relief.
That said, appropriately, the submissions of the intervener also identified what were described as a number of “blemishes” (perhaps more aptly described as failures) her case, being that:
(a)the construction of her case, as to both the first and the second advances, being loans to both the husband and the wife was rejected; as was her efforts to ground a priority re‑payment of them from both the husband and the wife by way of security or charge; and
(b)the value sought to be recovered by way of the second advance was reduced on the last day of the second trial to $80,000; the relief to seek that reduced sum to be paid in priority from the control monies account of the parties to the marriage was unsuccessful; and
(c)the claim to recover the third advance of $100,000 was abandoned at the first trial.
The wife in submissions identified the unsuccessful attempts of the intervener, in the shadow of the discrete issues trial, to amend her relief to prosecute equitable claims (as opposed to claims based on agreements to advance and secure funds (see Pearce & Pearce (No 2) [2022] FedCFamCF1 193). The wife also identified in the property adjustment reasons at [192] that the intervener was less than clear as to the foundation at law grounding her amended relief as sought on the last day of second trial to reduce the value she sought to recover for the second advance from $200,000 to $80,000, implicitly abandoning her claim to recover the balance at least from the wife.
The wife further submitted a relevant consideration was the failure of the intervener to disclose the additional $1 million paid to the husband post-separation, such fact going to the finding as to the likelihood of her calling upon the advances to be repaid except for the fact of the s 79 litigation.
Putting it another way, the intervener had mixed success in her relief as claimed over the many years of the litigation and some of her conduct was relevant to s 117(2A) considerations. If approached from a perspective as to the value of advanced funds recovered, she achieved more success than not. If approached from a perspective as to success by way of numbers of prayers for relief she achieved, that may or may not be the case, dependant on which prayers are considered to be superior to others.
It was submitted that a consideration as to costs in favour of the intervener was because she was a third party to the marriage and was required to be engaged in four years of litigation and expense. This submission ignores the reality that the intervener was joined to the litigation on her own application. This is to be contrasted with joinder of a third party over objection. Her participation as a party was at her election.
The wife gave evidence as to six offers of compromise being made to the intervener (and also the husband) throughout the course of the litigation commencing from 17 April 2020 until 24 May 2023. Notwithstanding the estrangement in the relationship between the intervener and the husband from about 2020, their respective cases were largely aligned by the time of the first trial.
The structure of each of the offers prior to the first trial was that a cash payment be made to the intervener from the controlled monies account of the husband and the wife. The maximum value of these offers prior to the determination of the repayment of the first advance was $300,000. This was less than half of the value of the first advance recovered by the intervener. These offers made by the wife were inferior to the result achieved by the intervener.
The offer made by the wife on 24 May 2023 as to the second advance was to pay the intervener $150,000. If accepted the intervener she would have achieved a significant better outcome than she did at s 79 trial in respect of the second advance. If the intervener had accepted that offer, she would have been in a better position than she is at the date of this costs hearing. She has elected not to recover the $200,000 advance from the husband. She would already have more than the $140,000 value of primary costs she currently seeks and would not have incurred any costs in participating in the second trial.
The wife placed emphasis on the fact that throughout the four years of litigation, the intervener made only one offer to compromise the dispute. This offer was made on 14 December 2020 (15 months before the discrete issues trial). Her “offer” was that the intervener receive the totality of the funds held in one of the joint bank accounts of the husband and wife, in the sum of $1,035,000. This amount represented nearly the whole claim of the intervener to be repaid the three advances totalling $1,050,000. In reality, it was not an offer of compromise at all. It was merely a demand to surrender, especially as the claim for recovery of the third advance was to be abandoned (see Pavlic & Pavlic (No 2) [2023] FedCFamC1A 97 at [14] and [15]).
The failure of the intervener to make a reasonable offer of compromise flies in the face of the obligations on litigants as identified in s 67 and s 68(1) in the Federal Circuit and Family Court of Australia Act 2021 (Cth).
CONCLUSION
A consideration of all the s 117(2A) factors in the circumstances of this closely balanced matter do not justify the making of an order for costs in favour of the intervener or in favour of the wife. The Application in a Proceeding of the intervener as to costs filed 20 June 2022 and Order 1 as sought in the Application in a Proceeding of the wife as to costs filed 18 July 2023 (as not determined by way of the consent order) will each be dismissed.
By way of this determination, Order 24 as to security for costs made on 4 July 2023 will be discharged (see r 12.04(2) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)) such that the solicitors for the wife will be at liberty to account to the wife for the $170,000 held in their trust account. So as to avoid any uncertainty on this topic, an order will be made to that effect.
For all of the above reasons orders shall be made as set out at the forefront of this judgment.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 5 September 2023
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