Peterson & Davis (No 5)
[2023] FedCFamC1F 587
•14 July 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Peterson & Davis (No 5) [2023] FedCFamC1F 587
File number: PAC 1208 of 2016 Judgment of: CAMPTON J Date of judgment: 14 July 2023 Catchwords: FAMILY LAW – COSTS – Where the de facto husband and his parents seek costs of the first instance proceedings, in circumstances where they were unsuccessful at first instance and then successful on appeal in a claim relating to the beneficial ownership of two real properties – Consideration of the factors at s 117(2A) of the Family Law Act 1975 (Cth) as are relevant – Where the conduct of the parties at first instance is a compelling factor weighing against the exercise of a costs discretion – Application dismissed. Legislation: Bankruptcy Act 1966 (Cth) s 58
Family Law Act 1975 (Cth) ss 90SM, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 6, r 12.13
Cases cited: Cachia v Hanes (1994) 179 CLR 403; [1994] HCA 14
Collins and Collins (1985) FLC 91-603; [1985] FamCA 15
Davis & Peterson [2023] FedCFamC1A 13
Greedy and Greedy (1982) FLC 91-250; [1982] FamCA 41
Luadaka v Luadaka (1998) FLC 92-830; [1998] FamCA 1520
Madden and Madden (1979) FLC 90-710; [1979] FamCA 72
Peterson & Davis (No 3) [2022] FedCFamC1F 650
The Cleaning Doctor NSW Pty Ltd v Fonseca [2023] NSWCA 110
Tuck and Tuck (1981) FLC 91-021; [1979] FamCA 33
Division: Division 1 First Instance Number of paragraphs: 59 Date of hearing: 9 June 2023 Place: Sydney The Applicant: Litigant in person The First Respondent: Litigant in person Counsel for the Second Respondent: Mr Cook Solicitor for the Second Respondent: Hammond Nguyen Turnbull Counsel for the Third and Fourth Respondents: Mr Ng Solicitor for the Third and Fourth Respondents: McEvoy Legal ORDERS
PAC 1208 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PETERSON
Applicant
AND: MR DAVIS
First Respondent
MR CUSSON
Second Respondent
MR B DAVIS (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
14 JULY 2023
THE COURT NOTES:
A.For the purpose of these orders:
(a)Ms Peterson shall be referred to as “the applicant”;
(b)Mr Davis shall be referred to as “the respondent”;
(c)Mr Cusson shall be referred to as “the trustee”; and
(d)Mr B Davis and Ms Davis shall be referred to collectively as the “third and fourth respondents”.
THE COURT ORDERS THAT:
1.Within seven days of the date of these orders, the trustee shall do all such acts and things to cause the amount payable to the respondent from the proceeds of sale of the property at C Street, Suburb B, NSW (“the Suburb B proceeds”) pursuant to Order 6 made on 31 August 2022, to be deposited to an account as nominated in writing by the respondent.
2.For the purpose of implementation of Order 1, within three days of the date of these orders, the respondent shall advise the solicitors for the trustee in writing as to the name of the nominated financial institution, the account name, BSB and account number into which the monies are to be deposited.
3.Save and except as provided for in these orders, the following applications are dismissed:
(a)The Application in a Proceeding filed by the trustee on 28 September 2022;
(b)The Application-Enforcement filed by the respondent on 9 November 2022;
(c)The Application in a Proceeding filed by the trustee on 28 December 2022;
(d)The Application in a Proceeding filed by the third and fourth respondents filed 31 March 2023;
(e)The Application in a Proceeding filed by the respondent on 26 May 2023; and
(f)The Response to the Application in a Proceeding filed by the applicant on 9 June 2023.
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 Peterson & Davis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
The disputes remaining before the Court have their genesis in the breakdown of the de facto relationship in March 2010 between Ms Peterson (“the applicant”) and Mr Davis (“the respondent”). On 17 March 2016, six years after their termination of their de facto relationship, the applicant commenced proceedings in what was then the Federal Circuit Court seeking orders as to the parenting of her and the respondent’s children and the adjustment of property between them.
The property adjustment dispute pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) between the applicant and respondent has been dwarfed by the ancillary disputes as between them, the respondent’s parents (“the third and fourth respondents”) and the applicant’s trustee in bankruptcy (“the trustee”) as to the beneficial ownership of two properties in D Town, New South Wales (“the D Town properties”). Further intense dispute erupted between the trustee and the respondent as to the trustee’s role as a court ordered appointment as trustee to recover and sell the home occupied by the applicant and the respondent during their relationship at Suburb B (“the Suburb B proceeds”). The respondent occupied the Suburb B property after separation.
The first instance proceedings was finalised by way of orders made on 31 August 2022. Nine orders made on that date were discharged on 17 February 2023 as a result of a successful appeal brought by the third and fourth respondents to the Full Court. These reasons are to be read with both the first instance reasons delivered on 31 August 2022, Peterson & Davis (No 3) [2022] FedCFamC1F 650 (“the first instance reasons”), and those delivered by the Full Court on 17 February 2023, Davis & Peterson [2023] FedCFamC1A 13 (“the appeal reasons”). The applicant has applied for special leave to appeal from the determination of the Full Court to the High Court. That application is as yet undetermined (see [38] of these reasons).
On 31 August 2022 orders were made as follows:
[Suburb B] proceeds of sale
6.The respondent and the trustee shall do all acts and things as are necessary within 28 days from the date of these orders to cause the balance of the proceeds of sale of the property known as [C Street, Suburb B], NSW (“the [Suburb B] proceeds”) to be applied as to:
(a) 50 per cent to the second respondent;
(b) 7.5 per cent to the applicant; and
(c) 42.5 per cent to the respondent.
…
Remaining property
13.Each of the applicant and respondent otherwise be declared to hold to the exclusion of the other all cash at bank, items of furniture and personalty, motor vehicles and superannuation entitlements in their respective possession or control as at the date of these orders.
Costs and finalisation of proceedings
14.The costs of each party are reserved for 28 days from the date of these orders.
15.Save and except for as determined by these orders, any and all outstanding applications are dismissed.
Order 14 was discharged by the orders made by the Full Court on appeal, and the following order made:
6.The first and third respondents within 42 days pay the [third and fourth respondents’] costs of the appeal, fixed in the sum of $98,683.51 in the proportion as to 25 per cent to the [applicant] and 75 per cent to [trustee].
After the delivery of the first instance reasons, and again after the delivery of the appeal reasons, the parties filed a number of applications as to the enforcement and variation of the final orders made on 31 August 2022 that remained undisturbed on appeal, and as to the costs of the first instance proceeding. These reasons determine the following outstanding applications, and in doing so, seeks to finally dispose of the longstanding litigation in this Court:
(a)The Application in a Proceeding filed by the trustee on 28 September 2022;
(b)The Application–Enforcement filed by the respondent on 9 November 2022;
(c)The Application in a Proceeding filed by the trustee on 28 December 2022;
(d)
The Application in a Proceeding filed by the third and fourth respondents filed
31 March 2023;
(e)The Application in a Proceeding filed by the respondent on 26 May 2023; and
(f)The Response to the Application in a Proceeding filed by the applicant on 9 June 2023.
DOCUMENTS RELIED UPON
The applicant relies upon the following:
·Her Response to an Application in a Proceeding filed 9 June 2023;
·Her affidavit filed 9 June 2023; and
·Written submissions filed 9 June 2023.
The applicant filed an Application in a Proceeding seeking her costs of the first instance proceedings on 28 September 2022. Subsequent to the determination of the Full Court on 17 February 2023, she withdrew that application on 24 February 2023.
The respondent relies upon the following:
·His Application-Enforcement filed 9 November 2022;
·His Application in a Proceeding filed 26 May 2023;
·His affidavit filed 9 November 2022;
·His affidavit filed 24 March 2023;
·His affidavit filed 26 May 2023;
·The affidavit of Mr P Davis filed 24 March 2023.
The trustee relies upon:
·His Application in a Proceeding filed 28 September 2022;
·His Application in a Proceeding filed 28 December 2022;
·Paragraphs 1–6 of the affidavit of the trustee filed on 1 October 2020;
·Paragraphs 1–34 of the affidavit of the trustee filed on 5 March 2021;
·The affidavit of Mr AN filed on 28 September 2022;
·The affidavit of Mr AN on behalf of the trustee dated 9 June 2023; and
·Written submissions filed 9 June 2023.
The third and fourth respondents, the respondent’s parents, rely upon:
·Their Application in a Proceeding filed 31 March 2023 (“the third and fourth respondents’ costs application”); and
·The affidavit of Mr AM filed 31 March 2023.
Broadly:
(a)The trustee applied first in time to vary Order 7(f) made by Foster J on 11 August 2020 fixing his remuneration for conducting the sale of the Suburb B property pending further order in the sum of $10,000 to $35,783.55. He sought that such additional claimed remuneration be paid from the respondent’s adjusted share of the Suburb B proceeds (which he was to receive pursuant to Order 6 made 31 August 2022, undisturbed on appeal). He says that the amount he continues to hold from the proceeds on behalf of the respondent is $36,946.59. The trustee anticipates that if he is successful in this claim, the respondent’s share of the Suburb B proceeds may be exhausted.
(b)The respondent opposes the trustee’s relief. He sought, after the filing of the trustee’s Application in a Proceeding, relief for enforcement of Order 6 made 31 August 2022 for the trustee to pay to him his adjusted share of the Suburb B proceeds.
(c)The trustee then applied in reply to “discharge” Order 6 made 31 August 2022, or that the enforcement of the order be stayed pending determination of his relief to vary Order 7(f) made by Foster J on 11 August 2020. The trustee withdrew his relief to discharge Order 6 made 31 August 2022 on 23 May 2023.
As between the trustee and the respondent, it was generally accepted that the Court was bound to consider the trustee’s application for variation of his remuneration and its effect on the respondent’s share of the Suburb B proceeds before considering the respondent’s application for enforcement. I accept is therefore appropriate to determine first in sequence the Application in a Proceeding of the trustee filed 28 September 2022 and the Application in a Proceeding filed 28 December 2022 before turning to the determination of the respondent’s enforcement application filed 9 November 2022.
Further:
(a)The trustee by way of his Application in a Proceeding filed 28 September 2022 seeks orders as to payment of his costs or the first instance proceedings payable by the respondent and the third and fourth respondents; and
(b)The third and fourth respondents by way of their Application in a Proceeding filed 31 March 2023 seek orders as to their costs of the first instance proceedings payable by the applicant and the trustee in the sum of $230,000 jointly. They do not specify any proportion or basis upon which the costs would be paid by the applicant and trustee; and
(c)The respondent by way of his Application in a Proceeding filed 26 May 2023 seeks orders as to payment of his costs of the first instance proceedings payable by the first respondent in the sum of $217,859.33, and “if so need be”, by the trustee if the first respondent cannot make such payment.
Each party opposes the costs relief sought against them, including the applicant who opposes any order that she pay costs of any party to the first instance proceeding.
In the circumstances where Order 14 made 31 August 2022 was discharged by the Full Court (see [4] and [5] above), r 12.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) has application as to relief as to costs. It provides that an application for costs may be made by filing an Application in a Proceeding within 28 days of final orders being made. The trustee’s costs application was filed within the timeframe prescribed by Order 14 (albeit now discharged) and within the timeframe as specified in the Rules.
The third and fourth respondent’s costs application was filed seven months after the final orders were made. The respondent’s costs application was filed nearly nine months after the final orders. Hence each was filed well after the timeframe prescribed by the Rules. Sensibly, no objection was taken by the trustee to extending the time for filing each of those costs applications in circumstances where the orders of the Full Court on appeal were made on 17 February 2023. The third and fourth respondents’ costs application was made six weeks later, and the respondent’s costs application was made three months later. In so far as was necessary, I found that the third and fourth respondents ought to have leave to file their costs application out of time.
Although no explanation was provided by the respondent for his delay in making his costs application, in circumstances where he is not legally represented and the applicant did not oppose him having leave to file it late, it is appropriate that the respondent have leave to file his costs application out of time.
It is appropriate to determine the costs applications in the chronological sequence in which they were filed.
DETERMINATION
The trustee’s application to increase his remuneration for conducting the sale of the Suburb B property and the respondent’s enforcement application
By way of the Application in a Proceeding filed on 28 September 2022, the trustee seeks an order that:
1.The remuneration of the [trustee] for conducting the sale in accordance with Order 7(f) made on 11 August 2020 be fixed in the amount of $35,783.55.
The first instance reasons record at separation on 15 March 2010 the applicant vacated the Suburb B property and the respondent remained living in it. The applicant was bankrupted in October 2011. By operation of s 58(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”), the applicant’s property vested in her trustee in bankruptcy and the trustee became a registered proprietor as a tenant in common with the respondent of the Suburb B property. The applicant was discharged from bankruptcy in October 2014.
In mid-2020 the respondent was incarcerated and remained so until early 2021. On 31 July 2020, orders were made permitting the trustee to attend the Suburb B property to facilitate it being valued by a single expert real property valuer in preparation a final hearing of this matter (then listed to commence on 10 August 2020). On 11 August 2020, being the second day of the soon to be aborted trial, the following orders were made (with reasons being delivered on 1 September 2020):
WITH THE CONSENT OF THE APPLICANT AND THE SECOND RESPONDENT AND UPON NOTING THERE IS NO APPEARANCE BY OR ON BEHALF OF THE FIRST RESPONDENT HUSBAND AND THE THIRD AND FOURTH RESPONDENTS NOT WISHING TO BE HEARD, IT IS ORDERED THAT
1.The [[Suburb B] Property] be sold.
2.The Second Respondent be authorised and directed to sell the [Suburb B] Property.
3.The Second Respondent’s powers for the purposes of the sale of the [Suburb B] Property are as follows:
…
(c)The power to engage a sales agent for the purposes of the sale of the [Suburb B] Property.
(d)The power to engage a solicitor to act on the conveyance of the [Suburb B] Property and, if necessary, to obtain vacant possession of it.
(e)The power to remove and store chattels contained on or in the [Suburb B] Property.
(f)The power to affect any necessary repairs to present the [Suburb B] Property for sale.
(g)The power to obtain an updated valuation of the [Suburb B] Property, if necessary.
(h)The power to set the sale price and a reserve price for auction if necessary, having regard to the valuation he holds.
4.In regards to any chattels removed from the [Suburb B] Property by the Second Respondent, the Second Respondent shall be authorised to place those chattels in commercial storage for six (6) months, such storage fees to be paid from the proceeds of sale.
5.The Second Respondent shall provide access to the Parties or any other person asserting ownership of those chattels for the purpose of inspecting the same and shall be authorised to release claimed chattels on reasonable proof of ownership, and otherwise shall be authorised to dispose of the remaining chattels after six (6) months.
6.The sale of the [Suburb B] Property by the Second Respondent may be carried out by auction or private treaty as the Second Respondent sees fit.
7.The proceeds of the sale of the [Suburb B] Property are to be paid as follows.
(a)To adjustments for rates and land tax.
(b)Sales agent’s commission and the cost of conveyance.
(c)The amount required to discharge the first registered mortgage.
(d)The legal costs, if any, involved in taking possession of the [Suburb B] Property.
(e)The cost of chattel storage for up to six (6) months and disposal of the chattels.
(f)The remuneration of the Second Respondent for conducting the sale charged at his usual rates limited, until further order, to a maximum amount of $10,000.
(g)The balance to be held by the Second Respondent in his trust account until further order.
The first instance reasons further record:
117.On 25 February 2021, after completion of the sale of the [Suburb B] property, the respondent filed a Contravention Application alleging a breach of the 11 August 2020 orders by the trustee, in that he had “not provided access for [the] purpose of inspecting” and “not [released] claimed chattels on reasonable proof of ownership”. The contravention proceedings were listed before [a] Registrar […] of the (then) Family Court on 8 March 2021, who observed by way of notations to the orders published on that date that:
“…the Court ascertained that although a Contravention Application had been filed, the main issue that [the respondent] sought to be addressed was access to collect goods held by the trustee in a Storage Facility which the trustee had no objection to [the respondent] taking.”
118.It was further noted on those orders that the respondent had made attempts to collect his goods from the storage facility but had been unable to do so because of his incarceration.
119.The respondent’s Contravention Application was ultimately withdrawn and dismissed on 6 May 2022.
120.On 28 April 2021, the respondent filed an Application in a Case seeking inter alia to have the 11 August 2020 orders of Foster J discharged, and that the respondent’s costs of the proceedings and the fees incurred in storing the respondent’s chattels be paid by the trustee (in his personal capacity), and that the trustee “sign Authorisation documents” to grant the respondent access to “all [his] vehicles […]”. That Application in a Case was withdrawn and dismissed on 6 May 2022.
121.On 6 May 2021, the respondent filed a further Application in a Case again seeking a discharge of some of the August 2020 orders of Foster J and again seeking access to the storage facilities wherein the applicant and respondent’s chattels were being retained. That Application in a Case was also withdrawn and dismissed on 6 May 2022.
In early 2021 the trustee completed the sale of the Suburb B property for over $500,000. After payment of the mortgage, arrears rates and selling costs together with the $10,000 by way of remuneration for the trustee (pursuant to Order 7(f) made 11 August 2020), the balance of proceeds of sale available for adjustment were $91,502. This was the value of the Suburb B proceeds at trial.
At trial the trustee initially did not seek any relief greater than his vested legal entitlement to the Suburb B proceeds of sale (that is, 50 per cent of $91,502). This relief was refined by way of his updated Case Outline document filed on 28 May 2022 in which the trustee sought:
(a)Approval of his further claim for remuneration and payment of his expenses incurred on the disposal of the Suburb B property other than as provided for by the 11 August 2021 orders of Foster J; and
(b)That they be paid from the Suburb B proceeds “off the top” before any adjustment between he, the applicant and respondent; and
(c)That the respondent meet any shortfall of the trustee’s remuneration as then claimed and expenses should the proceeds of sale be insufficient to meet that liability.
In relation to this amended relief, the first instance reasons record:
425.Over the course of the oral evidence it emerged that the respondent had eventually secured from the trustee a significant volume of items that the trustee had removed from the [Suburb B] property prior to it being sold and stored. This included a quantity of personality, tools and 11 motor vehicles.
…
The trustee’s remuneration
…
431.The trustee’s claim was that his fees and disbursements in effecting the disposal of the [Suburb B] property (including taking possession, effecting the sale, and dealing with the chattels) totalled $189,522.63. Invoices and receipts included in the exhibits to the trustee’s affidavits record most, if not all, the costs of the chattels storage have been paid from the proceeds of sale together with real estate agents’ costs. The settlement statement and trust account records exhibited by the trustee suggest that this $10,000 payment for remuneration in acting as a trustee on the sale has been paid.
432.The orders made on 11 August 2020 capped the reimbursement of the trustee’s fees on the sale, until further order, at $10,000. The trustee sought in his Amended Response filed 20 May 2022
14.An order that any payment to the [trustee] by any of the parties is paid in priority to any of the other parties interests and is to include the statutory realisation charge with such payments of any monies to be made on a forthwith basis.
433.This relief was refined in the trustee’s Case Outline as follows:
4. Next the [trustee] seeks orders that he disburse the net proceeds of sale of the [Suburb B] property after deduction of his remuneration and expenses of its sale as to half to himself as trustee of the bankrupt estate of the [applicant] and the other half to the [respondent]. It is likely that there will be a negative position (loss) from the sale of this property once the costs of [the trustee] and his expenses in realising the property are set off against the net sale proceeds which the Court should adjust against the [the respondent’s] interest.
434The import of the amended relief as sought is as to the approval of his remuneration and payment of his expenses as claimed incurred on the disposal of the [Suburb B] property as provided for by the 11 August 2021 orders. I accept the trustee’s submission that there will be either little funds remaining or a loss from the [Suburb B] proceeds are adjusted to meet the balance of his costs as claimed “off the top” before any adjustment between he, the applicant and respondent.
435.The applicant and the respondent disputes the trustee’s claim for his remuneration, fees and disbursements incurred pursuant to the order made 11 August 2021 being greater than that provided for by the said orders. All be it that Order 7(f) was expressed to be pending further order, it was a consent order containing a quantum agreed to by the trustee and the applicant. (but undefended as against the respondent) Implicitly, the trustee anticipated at that time of entering the order that the quantum of $10,000 was sufficient to satisfy his remuneration for the role of trustee on the sale of [Suburb B], and it was the events post the order that have inflated those expenses. This may be relevant to this claim. The orders made on 11 August 2020 have not been the subject of appeal. Responsibility as to the source of a portion of the significant quantum now claimed arises from the conduct of the trustee and the respondent as identified earlier in these reasons. This may be also be relevant to the claim.
436.The trustee did not identify the source of power relied upon grounding his amended relief as sought, nor was I taken during the course of submissions to any legislation, applicable principle or specific evidence on this subject matter. In those circumstances I am unable to make any determinations as to the necessary preconditions and relevant considerations for the making of the orders as sought by the trustee. I dismiss that part of the relief of the trustee. This determination does not preclude the trustee from making such application as he is advised as to the costs of the interlocutory and contempt applications made subsequent 11 August 2020 orders.
(Emphasis added)
For the reasons identified and by operation of Order 15 made on 31 August 2022 dismissing all extant applications, the trustee’s claim for unpaid remuneration and expenses arising from the sale of the Suburb B property was determined in the first instance proceedings and dismissed. Order 15 was not disturbed on appeal. That issue cannot now be relitigated. The relief as sought in paragraph 1 of the trustee’s Application in a Proceeding filed 28 September 2022 will be refused. The Application in a Proceeding of the trustee filed 28 December 2022 will be dismissed.
Subject to the determination of the respondent and the trustee’s respective costs applications, during the hearing on 9 June 2023, counsel for the trustee confirmed that upon publication of these reasons, in the event the trustee was unsuccessful in his relief to vary his remuneration payable pursuant to Order 7(f) made on 11 August 2022 or as to his application for costs payable by the respondent, he would forthwith pay to the respondent his adjusted share of the Suburb B proceeds. I accept for the purposes of this determination that the trustee will do as he says he will do.
Having regard to the trustee’s concession and the determinations made later in these reasons, it is appropriate that the trustee be given seven days to do as he said he will. An order will be made to that effect. The respondent sought by way of enforcement interest payable on the outstanding monies. He did not make any material submissions on this prayer for relief. In the circumstances of this case, having regard to the matters identified above and following in these reasons, I refuse in the exercise of my discretion his relief seeking interest on the outstanding sum to be distributed in his favour. His Application-Enforcement filed 9 November 2022 will otherwise be refused, save for his application for costs of the enforcement of $2,450. That application for costs will be determined later in these reasons.
The costs applications
The trustee seeks that the respondent and the third and fourth respondents pay his costs of the first instance proceedings (paragraph 2 of the Application in a Proceeding filed on 28 September 2022). That said, he made no submissions (either by way of his written submissions filed 9 June 2023 or orally during the hearing) as to the costs relief as sought in that Application in a Proceeding, which was described by the trustee only as an application seeking an “increase in the remuneration of the [t]rustee for the sale of the [Suburb B] property”. In those circumstances, I have taken that the relief sought in paragraph 2 of the Application in a Proceeding filed 28 September 2022 as to costs of the trustee of the first instance proceeding to be abandoned. The application in a proceeding filed 28 September 2022 will be dismissed.
The third and fourth respondents seek that the applicant and the trustee pay their costs of and incidental to the proceedings fixed in the sum of $230,000, or in the alternative as assessed or agreed (paragraph 2 of the Application in a Proceeding filed 31 March 2023). Their application is made against the trustee in his capacity as trustee of the applicant’s bankrupt estate, and in his personal capacity (that is, the liability for costs would not be limited to be recovered from the estate but to the extent of any deficiency in the estate to meet the liability, it would be borne by the trustee personally).
The respondent seeks that the trustee pay his costs of and incidental to the first instance proceedings fixed in the sum of $217,859.33 (paragraph 2 of his Application in a Proceeding filed 26 May 2023). He sought that the applicant contribute to those costs “if so need be” (paragraph 3 of his Application in a Proceeding filed 26 May 2023).
Relevant principle
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. They relevantly to these proceedings, include the following:
(a) the financial circumstances of each of the parties to the proceedings;
…
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answers, questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings; and
…
(g) such other matters as the Court considers relevant.
The Full Court 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 (see Collins and Collins (1985) FLC 91-603 (at 79,877). In Greedy and Greedy (1982) FLC 91-250 and Luadaka v Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters. The Court may give such weight as it considers appropriate to any relevant factor.
Hence, for the purpose of my consideration of the costs applications, 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 on party pay the others costs.
Third and fourth respondent’s application for costs against the trustee and the applicant
The applicant resists any costs order being made against her. Her written submissions filed on 9 June 2023 record that her financial circumstances at the time of the first instance trial were poor and have only deteriorated since. This contention is supported in part by the fact that:
(a)By application of the final orders undisturbed on appeal, the applicant retained 7.5 per cent of the Suburb B proceeds of sale, being approximately $6,863, and retained her bank account, household contents and Motor Vehicle 3 and will be responsible for her current liabilities. Each asset is of modest value. It was undisputed in the first instance proceedings that the applicant and respondent’s child, Z who is now 16 years old, lives with the applicant in rental accommodation in City R, and that the two older children, although now adults, remain dependent on the applicant. I found that the applicant was unlikely to receive periodic child support from the respondent for Z (at [470]);
(b)Pursuant to the costs order made by the Full Court on appeal, she is required to pay 25 per cent of the costs of the third and fourth respondents fixed (in total) in the sum of $98,683.51. Her liability for those costs was therefore in the range of just under $25,000;
(c)On 27 April 2023 she was served a Bankruptcy Notice by email from the solicitor for the third and fourth respondents grounded from her non-payment of the costs order made by the Full Court on 17 February 2023. That Notice is annexed to her affidavit. That fact that the third and fourth respondents have pursued further bankruptcy litigation against the applicant within such short compass of her default of payment of the costs order while her application for special leave remains pending is indicative of the absolute unabating animosity and ill-will that exists between them.
I accept that the applicant’s modest and potentially dire current financial circumstances is a factor that weighs against an exercise of discretion requiring her to pay the costs of the third and fourth respondents.
There is no evidence of the financial circumstances of the trustee.
The third and fourth respondents elected not to file any affidavit as to their own evidence in support of their application for costs. There is very little evidence as to the current financial circumstances of the third and fourth respondents. By way of the Full Court’s determination, they have received the D Town properties subject to any mortgage on those properties. There is no evidence as to the current value of those properties nor the value of any loan secured upon them. They have the benefit of at least one other real property of unknown value at Suburb S and the costs order of the Full Court, in the sum of $98,683.51. The first instance reasons record that the third respondent is retired and the fourth respondent was employed in sales for T Company, and that her latest disclosed taxation return recorded that her taxable income for the 2019 financial year was $90,393 (at [48] of the reasons).
The affidavit of Mr AM filed 31 March 2023 records that the third and fourth respondents have incurred “legal costs in the first instance proceedings in excess of $334,523.07 (Incl GST)”. It did not specify the portion of those costs that have been paid and the portion that remains unpaid. The affidavit annexed various invoices issued by the third and fourth respondent’s solicitors, but did not include a copy of the costs agreement.
For the purpose of this determination, I infer that these omissions identified in [35] and [36] above were forensic decisions made by the third and fourth respondents not to provide relevant information as to their current financial circumstances as it would not assist them in the prosecution of their application for costs. This factor weighs against an exercise of discretion in their favour.
The applicant identified that she has filed an Application for Special Leave to appeal from the decision of the Full Court. In her submission, that application is “eminently contestable”, in that the Full Court’s reasoning in the appeal reasons does not sit on all fours (and on one view, is wholly inconsistent) with the recent decision of the New South Wales Court of Appeal in The Cleaning Doctor NSW Pty Ltd v Fonseca [2023] NSWCA 110 (applicant’s written submissions, paragraph 4). The facts and circumstances as determined by the New South Wales Court of Appeal close to mirror those in this matter. I give these matters little weight for the purpose of this costs determination. At this time, they are wholly speculative.
By way of the Full Court’s determination, the applicant and the trustee were wholly unsuccessful in resisting the third and fourth respondents’ claim to the D Town properties. This is a factor attracts significant weigh in favour of a costs order being in favour of the third and fourth respondents. That said, it is relevant that the trustee’s position in defending the third and fourth respondent’s claim to the D Town properties originated from the fact that upon the applicant’s bankruptcy in October 2011, her property vested in her trustee (s 58 of the Bankruptcy Act 1966). At that time, the D Town properties were held at law by the applicant and the respondent and hence it was open for the trustee to reasonably presume, having regard to the disclosure failures recorded hereunder, that her interest in them formed part of the bankrupt estate (at [41] of the first instance reasons). As recorded in the first instance reasons:
(a)Throughout 2012 and 2013 the trustee corresponded with the solicitor acting for the third and fourth respondents, and with the respondent, seeking disclosure of a broad range of documents, including to support the trust contentions. There was no evidence of compliance with that notice by the respondent (see [131] of the first instance reasons);
(b)The file of the solicitors acting on the transfer of the D Town properties from the third and fourth respondents to the applicant and respondent was not disclosed until the third day of the trial, some 10.5 years after the applicant’s bankruptcy; and
(c)No document exists disclosing the existence of an express trust existing over the D Town properties being the primary case prosecuted by the third and fourth respondents
Many of the documents and evidence which formed the “incontrovertible facts” identified by the Full Court as leading to the inevitable conclusion that the third and fourth respondents were the beneficial owners of the D Town properties only emerged by way of subpoena, disclosure and cross-examination processes as part of the first instance proceedings. In the absence of that evidence or its testing, and in circumstances where the contended trust agreement was wholly oral, the trustee’s conduct in defending the third and fourth respondent’s claims to the properties could not have been said to be wholly unreasonable.
In resisting the costs application of the third and fourth respondents as against him, the trustee submitted forcefully that the conduct of the third and fourth respondents throughout the first instance proceedings disentitled them from any costs order. The trustee observed that:
(a)At [172], [176], [177], [200], [201] and [206] of the first instance reasons, adverse findings were made against the third and fourth respondents, including that their evidence was unreliable or inaccurate, was “infected by errors and omissions” and contained “absolute statements of fact… that were untrue”. None of these findings were disturbed on appeal;
(b)The third and fourth respondents failed to comply with an order made by consent as to the payment of rental income received on the D Town properties from 30 August 2018, and gave no explanation for their non-compliance (at [99] of the first instance reasons);
(c)It was not until the penultimate day of the trial that counsel for the third and fourth respondents would not rely upon or read the affidavits of the fourth respondent and the respondent’s brother; and
(d)A fundamental aspect of the third and fourth respondent’s case prosecuted throughout the first instance proceedings was abandoned or shifted during the course of the trial (see [332] of the first instance reasons).
It was the trustee’s submissions that the conduct of the third and fourth respondent’s caused “unnecessary complexity” and “confusion” in the prosecution of the proceedings, and required lengthy cross-examination of witnesses that in turn increased the length of the trial. The applicant joins in on this submission. She contends that the case of the third and fourth respondents “and evidence relied on, kept shifting, leading to unnecessary expense” (applicant’s written submissions, paragraph 5).
This resonates in part with what was argued by the third and fourth respondent’s on appeal and accepted by the Full Court that “despite the plethora of evidence adduced in the case and the ready acceptance that different witnesses gave differing accounts of the same event, there remained a series of what were described as incontrovertible facts” (at [25] of the appeal reasons), and that those incontrovertible facts lead inexorably to only one outcome. Hence, even on the third and fourth respondent’s submissions, much of the evidence they adduced in the first instance proceedings and its subsequent forensic examination over the course of the first instance trial was, as implicitly identified by the Full Court, unnecessary to the final determination. It simply generated very substantial cost, expense and delay.
I accept the gravamen of the trustee’s submissions on this issue. The first instance reasons record the third and fourth respondents’ conduct in the first instance proceedings as being non‑cooperative and obstructive in such a way that caused those proceedings to be unduly prolonged and more likely than not resulted in the other parties to the proceedings to incur legal fees that otherwise could have been avoided. This included issues as to their failure to disclose relevant documents in a timely manner, including taxation returns and of other evidence which only emerged in cross-examination of the third respondent (see for example at [173] of the first instance reasons). In my view, this matter alone would speak against an exercise of discretion to order costs in the third and fourth respondent’s favour (see e.g. Tuck and Tuck (1981) FLC 91-021), but my conclusion is nonetheless reinforced by the other findings as identified above.
Upon a consideration of all of the relevant factors set out in s 117(2A) of the Act, I find that on balance, the circumstances do not justify the making of a costs order in favour of the third and fourth respondents. Their Application in a Proceeding filed 31 March 2023 will be dismissed.
The respondent’s costs application against the trustee and the applicant
Many of the above considerations apply also to an assessment of the s 117(2A) considerations of the respondent’s application for costs of the first instance proceedings. Those include:
(a)The financial circumstances of the applicant and the trustee as identified at [32] and [34] above, being a factor which weighs against the making of the costs order sought by the respondent insofar as it relates to the applicant; and
(b)The conduct of the trustee in defending the third and fourth respondent’s relief as to the D Town properties, to which the respondent joined in with, as identified at [39] and [40] above. This is a factor which weighs against the making of the costs order sought by the respondent insofar as it relates to the trustee.
Further additional considerations apply to the respondent’s costs application of the first instance proceedings.
There is some limited evidence as to the respondent’s financial circumstances. Having regard to my determination of the trustee’s application to increase his remuneration from the sale of the Suburb B proceeds, the respondent will receive his share of those proceeds within the immediate future. He has been financially supported by his parents, the third and fourth respondents, and his brother since at least 2017 (see [56] of the first instance reasons). The third and fourth respondents met an undisclosed portion of the respondent’s legal fees incurred in the first instance proceedings (see [124] of the first instance reasons). I find that this factor weighs against the making of the costs orders sought by the respondent.
The applicant and the trustee were not wholly unsuccessful in the balance of the property adjustment proceedings. Each of the applicant, the respondent and the trustee’s positions as to what a just and equitable outcome of the property adjustment exercise would be were recorded in the first instance reasons at [21]–[27].
Finally, and persuasively, it was submitted by each of the applicant and the trustee that the respondent’s conduct in the first instance proceedings, similarly to the third and fourth respondents, ought to disentitle him from a costs order in his favour. I accept this submission, and place significant weight on it, having regard to:
(a)My findings that the respondent’s evidence lacked integrity and was at times misleading and inaccurate (including at [279] and [284] of the first instance reasons);
(b)The respondent’s failure to comply with his obligations of disclosure as codified in ch 6 of the Rules (see [111] and [291] of the first instance reasons);
(c)The respondent’s propensity to act belligerently in the proceedings (at [293]-[294] of the first instance reasons);
(d)The hostile and combative relationship promoted by the respondent between he and the trustee, which was characterised by extensive inappropriate communications; and
(e)The two Applications in a Proceeding and the Application-Enforcement filed by the respondent and then withdrawn (as recorded at [119]-[121] of the first instance reasons), unnecessarily consuming Court resources and undoubtedly increasing the costs incurred by the trustee in responding to those futile applications.
I find that the respondent should not achieve advantage by way of a costs order having regard to his history of poor compliance with the orders of the Court and his statutory obligations of disclosure (see e.g. Madden and Madden (1979) FLC 90-710). On balance, placing significant weight on this factor, and taking into account those other relevant considerations set out above, I am not satisfied that the circumstances justify the making of a costs order as sought by the respondent of the first instance proceedings. His Application in a Proceeding filed 26 May 2023 shall be dismissed.
Insofar as the respondent pressed an application for costs of and incidental to his Application‑Enforcement filed 9 November 2022, that application will also be refused. I accept that the application was necessitated by the trustee’s failure to comply with the final orders. However, both the application itself and the affidavit in support filed on the same day record that the documents were prepared by the applicant himself (rather than a solicitor). A Notice of Ceasing to Act was filed by the respondent’s former solicitors on 10 November 2022 (the day after his enforcement application was filed). The respondent has remained self-represented since that date. He appeared himself before me at the hearing on 30 June 2023. It is unclear what, if any, legal costs he has incurred in the preparation and prosecution of the relief. There is no evidence to ground a finding on this issue. To the extent that the quantum claimed is for costs of the respondent’s own time in preparing his case, those costs are not recoverable for the purpose of s 117 of the Act (see Cachia v Hanes (1994) 179 CLR 403). This aspect of his Application-Enforcement filed 9 November 2022 will be refused. Orders will be made dismissing the Application-Enforcement filed 9 November 2022.
CONCLUSION
For all of the above reasons, orders shall be made as set out at the forefront of this judgment.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 14 July 2023
SCHEDULE OF PARTIES
PAC 1208 of 2016 Respondents
Fourth Respondent:
MS DAVIS
5
3