Phak and Xu

[2018] FamCA 992

FAMILY COURT OF AUSTRALIA

PHAK & XU [2018] FamCA 992

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Calderbank v Calderbank [1975] 3 All ER 333
Phak & Xu [2015] FamCA 939
Xu & Phak [2018] FamCA 898

APPLICANT: Ms Phak

RESPONDENT: Mr Xu

FILE NUMBER: MLC 9662 of 2012

DATE DELIVERED: 26 November 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By way of Written Submissions

SUBMISSIONS RECEIVED FROM

THE APPLICANT: In person

SOLICITOR FOR THE RESPONDENT: Oakfair Lawyers

Orders

1. The application for costs by the Applicant as set out in the written submissions filed 16 November 2018 and response thereto filed on 23 November 2018 are both dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Phak & Xu has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9662 of 2012

Ms Phak

Applicant

And

Mr Xu

Respondent

REASONS FOR JUDGMENT

1. On 7 November 2018 after a contested hearing on 30 October 2018, I published orders and reasons for judgment in an application to set aside orders made by Benjamin J on 30 October 2015[1]. The proceedings were between Ms Phak and Mr Xu and what follows are the reasons now arising out of a costs application brought by Ms Phak.

   [1] Published as Phak & Xu [2015] FamCA 939

2. Tor the purposes only of these reasons, Ms Phak is referred to as the applicant and Mr Xu as the respondent. In the proceedings before me, culminating in the orders of 7 November 2018, those positions were reversed.

3. The judgment of 7 November 2018 is published as Xu & Phak [2018] FamCA 898

4. The orders made included a dismissal of the respondent’s application to set aside the orders of October 2015. There are now extant substantive applications for property settlement relief under s 79 of the Family Law Act 1975 (Cth) (“the Act”). It will be sufficient background for those applications to say that the applicant and the respondent were married; are now divorced; had separated and then executed a binding financial agreement; and, that the orders of October 2015 set aside that financial agreement. It is unfortunate that the substantive application has not since been heard.

5. The applicant’s application for costs was by way of written submission filed 16 November 2018. She sought indemnity costs on the basis which she set out in her submission and I quote:

   [2]The Legal Costs (sic) I have been forced to incur and for which I seek reimbursement from the Respondent are as follows:

   (a)from commencement of proceedings and my initiating Application in the Family Court in March 2014 until the judgement (sic) handed down by Justice Benjamin on 30 October 2015 my billed costs were $465,545.65,

   (b)since the setting aside of the Binding Financial Agreement on 30 October 2015 until the adjournment of the previous Final Hearing of the substantive property settlement  on 30 October 2017 my billed costs were $149,982.89.

   (c)since the adjournment of the Final Hearing on 30 October 2017 until the commencement of my self-representation on 15 June 2018 my billed costs were $17,258.25.

   (original emphasis)

6. It will be self-evident that the applicant represented herself in the proceedings before me and prepared the costs application herself as well.

7. The respondent’s response to the costs application was also by way of written submission filed 23 November 2018. He sought that each party pay their own costs.

8. For the reasons that follow, I accept the position of the respondent that the proper and appropriate order is a dismissal of the applicant’s application.

9. The applicant submitted that in March 2015, lawyers then acting for her issued a Calderbank offer which bluntly said that there was no doubt that the financial agreement would be set aside and it was futile for the husband to proceed on the preliminary threshold question thereby incurring significant costs for both parties. The letter went on to say that the respondent should consent to the setting aside of the financial agreement leaving both to seek orders “in relation to the division of matrimonial property”.  It is curious what was intended by reference to “matrimonial property”.

10. The same letter of March 2015 said that in accordance with the decision in Calderbank[2], should the hearing proceed and the applicant obtain a better outcome, the letter would be produced in support of an application for costs calculated on an indemnity basis.

    [2]Calderbank v Calderbank [1975] 3 All ER 333

11. The applicant submitted that the respondent refused her offer and went on to say[3]:

    …and it should be emphasized that he exhibited bad faith and no willingness on his part to negotiate amicably what in principle was a very straight forward argument that I had not received $1million of property that the BFA had allocated to me.

    (original emphasis)

    [3] Paragraph [5] of the written submissions of the Applicant filed on 16 November 2018

12. In the present application for costs, the applicant said that the respondent’s application was based upon the “false allegation” that the agreement had been obtained by fraud and that it was that application that I dismissed on 7 November 2018. She said she would argue that the respondent had lost. She said that the respondent should have accepted her “genuine attempt at an amicable resolution”. She said he had been given every opportunity to minimise the pain and costs but made the choice to decline. In her view, the respondent’s position was to inflict as much pain on her as possible and she felt that he had to be held accountable.

13. Insofar as there were allegations made against her, the applicant said that the respondent always knew they were false. She said he purposely prolonged the proceedings and followed a course of fraudulent non-disclosure, concealment and dissipation of assets.

14. Much of the balance of the submission related to matters which are irrelevant to the issue I have to determine under s 117 of the Act, to which section, I return below.

15. The applicant said she was pursuing discovery from the respondent relating to the application under s 79 of the Act. She can do that appropriately at another time but not in the present application. The proceedings before me related to the discrete issue of setting aside the financial agreement. In respect of that discrete application, the applicant’s discovery requests were not relevant. It was indeed her own non-discovery, and her dishonesty, that gave rise to the respondent’s application in the first place.

16. The respondent’s application for a dismissal of the applicant’s application for costs referred to s 117 of the Act and it is appropriate that I mention that now.

17. Section 117 of the Act provides that in proceedings under the Act, each party shall bear their own costs unless there are reasons or circumstances to justify a departure from that principle and if the Court is contemplating such a circumstance, it must then take into account the matters set out in s 117(2A) of the Act.

18. Correctly, it was submitted by the respondent, registrar George on 13 July 2018 had ordered that the respondent’s application be determined as a separate issue under r 10.13 of the Family Law Rules 2004 (Cth) (“the Rules”) from the applicant’s application under s 79 of the Act.

19. In deciding whether to make an order for costs now, the first issue is whether there is a justifiable circumstance to depart from s 117(1) of the Act. In the case determined on 17 November 2018, the respondent’s substantive application was ambitious but not malevolent. In the judgment, I found the applicant had misled Benjamin J in an appalling way and that she continued in that vein before me to hide what she had inappropriately financially achieved.

20. In the respondent’s submission, it was said that the conduct of the applicant was significant and determinative of the issue of costs now. The submission went on to say that the applicant’s conduct was not only disingenuous but d fraud and intentional breaches of court orders.

21. In my reasons for judgment at paragraph [54], I said:

    [54]At [17], [of Magill v Magill [2006] HCA 51; (2006) 231 ALR 277] Gleeson CJ described the concept of fraud as being “wider in some legal contexts than others.” Like the duty of care to avoid damaging or injuring others, Gleeson CJ noted at [21] that “false representations about paternity could be the result of carelessness rather than deliberate fraud”. That distinction does not apply here because there is no suggestion of lack of care by the wife. This was a deliberate decision to achieve a windfall without the husband being told. It was her application to set aside the financial agreement based on her entitlement being valueless and as such, disclosing the money may have affected the exercise of the discretion by Benjamin J if his Honour had known what had occurred. I am satisfied in the circumstances that the wife’s conduct amounted to fraud.

22. Albeit he had been unsuccessful, it was submitted by the respondent that r 17.02 of the Rules, upon which he had relied, provided for discharge of an order if fraud was established. It was submitted on behalf the respondent that I had declined to exercise the discretion in his favour and thought that the matters should be adequately dealt with through the substantive proceedings under s 79 of the Act. I accept that submission.

23. The respondent submitted that the application by the respondent had not been without merit but had failed as a result of my exercise of discretion in terms of the interests of justice. I accept that submission too.

24. Discretion comes to the fore in the pursuit of justifiable circumstances under s 117 of the Act. Discretion is guided not just by justice but also by equity. Equity has always insisted that the person who comes seeking justice must come with clean hands. The applicant’s hands were (and in my view, still are) not clean. It was her conduct that gave rise to the respondent’s application in the first place. It was her conduct that made trying to determine what had happened to the money difficult. This is not a case where the circumstances justify an order for costs based simply because of the way in which the applicant has litigated.

25. In my view, the application of the applicant must fail.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 26 November 2018.

Acting Associate:

Date: 26 November 2018