Reed & Reed
[2022] FedCFamC2F 443
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Reed & Reed [2022] FedCFamC2F 443
File number(s): ADC 5972 of 2020 Judgment of: JUDGE BROWN Date of judgment: 17 March 2022 Catchwords: FAMILY LAW – application for costs – indemnity costs – matters to be considered. Legislation: Family Law Act 1975 (Cth) s 117.
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17.
Cases cited: In the Marriage of I & I (No 2) (1995) 22 Fam LR 557.
In the Marriage of Kohan (1992) 16 Fam LR 245.
Penfold & Penfold (1980) 144 CLR 311.
Division: Division 2 Family Law Number of paragraphs: 57 Date of hearing: 17 March 2022 Place: Adelaide Counsel for the Applicant: Mr Dillon Solicitor for the Applicant: ASW Lawyers Counsel for the Respondent: No appearance Solicitor for the Respondent: No appearance ORDERS
ADC 5972 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS REED
Applicant
AND: MR REED
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
17 MARCH 2022
THE COURT ORDERS THAT:
1.The Respondent husband pay the Applicant wife’s costs fixed in the amount of TWENTY FOUR THOUSAND ($24,000.00) which the wife is authorised to deduct from the settlement sum pursuant to the orders of 27 August 2021.
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 a pseudonym Reed & Reed has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
The reasons for judgment in this matter are being delivered orally following the hearing between the parties concerned. These reasons have been corrected for errors of expression and syntax in an attempt to make the orally delivered reasons amenable to being read.
The matter of Reed is listed before me today. Primarily, the proceedings are concerned with the division of the matrimonial property. They have a long history.
The wife in the proceedings, as she then was, Ms Reed (hereinafter referred to as “the wife” or “Ms Reed”), commenced these proceedings in or about December 2020. The respondent to the proceedings is Mr Reed (hereinafter referred to as “the husband” or “Mr Reed”).
BACKGROUND
By way of background, the parties married in 2005, but it is common ground, I think, that they had lived together prior to that date, and indeed, had known each other since they were teenagers.[1]
[1] See Affidavit of Ms Reed filed 11 December 2020 at [5], [7]; See Affidavit of Mr Reed filed 11 March 2021 at [4]-[5].
They separated in August of 2020.[2] They are the parents of two children who are close to their maturity. They are X, who was born in 2003, and Y, who was born in 2005.[3]
[2] See Affidavit of Ms Reed filed 11 December 2020 at [5]; See Affidavit of Mr Reed filed 11 March 2021 at [24].
[3] See Affidavit of Ms Reed filed 11 December 2020 at [3]; See Affidavit of Mr Reed filed 11 March 2021 at [3].
The proceedings primarily concerned two pieces of real property, a property at B Street, Town C (hereinafter referred to as “the B Street, Town C property”), and a property at D Street, Town E (hereinafter referred to as “the D Street, Town E property”).[4]
[4] See Affidavit of Ms Reed filed 11 December 2020 at [29]; See Affidavit of Mr Reed filed 11 March 2021 at [32].
In her application filed on 15 December 2020, Ms Reed, who I will refer to by her married name, although she has reverted, I think, to her maiden name, sought that the husband transfer the D Street, Town E property to her, as she was living in it at the time. She was open to a discharge a joint mortgage on the property.
At that stage, it was her position that another property, the B Street, Town C property be sold, and that the proceeds be applied to other liabilities, and whatever was left over, be decided 60:40 percent in her favour.
She deposed an affidavit in support of her position, and essentially it was her evidence that the parties had a lifestyle which was somewhat profligate, to some extent. Although Mr Reed was able to earn a high income from being a tradesman, he had used his income on gambling, drinking and illicit drugs, and in those circumstances, it was the wife’s position that the parties were in a precarious financial position.
She calculated that with all their debts, and what she believed was the value of the two properties, at best there was a property pool of around $80,000.00.[5] The financial crisis had been, it seems, intensified by the fact that the COVID-19 pandemic had prevented Mr Reed from working overseas, and he was out of work at the time.
[5] See Financial Statement of Ms Reed filed 11 December 2020.
The case came into court for the first time on 15 February 2021. A few days earlier, Ms F of G Law Firm had filed a Notice of Address for Service, but at that stage, Mr Reed had not filed any documents.
He had been served with Ms Reed’s application a few days after it had been issued on 19 December 2020, so he had a couple of months to respond, and certainly he had been able to instruct a solicitor.[6]
[6] See Affidavit of Service of Ms H filed 21 December 2020.
I acknowledge that it was the Christmas period. Significantly, on 15 February 2021, the parties were able to agree on a raft of orders.[7] Ms Peters, Ms Reed’s solicitor, appeared on her behalf, and Ms F appeared for Mr Reed.
[7] See orders of Judge Brown dated 15 February 2021.
The agreement between the parties was subject to a number of notations which indicate that some thought had been given to them. It was noted that the National Australia Bank, which was the parties’ financier, was no longer prepared to extend hardship provisions in respect of moneys relating to the mortgages on the property.[8]
[8] See orders of Judge Brown dated 15 February 2021 at Notation B.
It also noted that the husband had signed earlier a sales agency agreement with a firm of real estate agents to sell the B Street, Town C property.[9] Against that background, the husband was directed to file some answering documents.[10]
[9] See orders of Judge Brown dated 15 February 2021 at Notation C.
[10] See orders of Judge Brown dated 15 February 2021 at order (1).
He was granted the sole occupancy of the B Street, Town C property.[11] The wife was granted the sole occupancy of the D Street, Town E property, but the husband, with his acquiescence, was ordered to do all things necessary to prepare the B Street, Town C property for sale.[12]
[11] See orders of Judge Brown dated 15 February 2021 at order (2).
[12] See orders of Judge Brown dated 15 February 2021 at order (3)-(4).
Other orders dealt with the nomination of a real estate agent to do that.[13] The wife was directed to inquire of her financier as to how she would be able to discharge the mortgage on the D Street, Town E property.[14] The case was adjourned until May.
[13] See orders of Judge Brown dated 15 February 2021 at order (5).
[14] See orders of Judge Brown dated 15 February 2021 at order (8).
In the meantime, the parties were directed to attend a Conciliation Conference,[15] and Mr Reed was directed to file some answering documents, which he did. He filed his answering documents on 11 March 2021. Significantly, he sought an order that the B Street, Town C property be sold.[16]
[15] See orders of Judge Brown dated 15 February 2021 at order (17).
[16] See Response of Mr Reed filed 11 March 2021.
At that stage in his financial statement, he delineated what was an even more perilous financial position in that he estimated the parties’ assets to be worth about $60,000.00, and their liabilities to be something in the vicinity of approximately $376,000.00.[17]
[17] See Financial Statement of Mr Reed filed 11 March 2021.
In those circumstances, it was readily apparent, I think, that assets had to be liquidated. I concede, of course, that this necessarily is invariably a painful and difficult process. In any event, the parties attended a Conciliation Conference, it would seem, and the case came back to court in May 2021.
Again, Ms Peters appeared for the wife, and Ms F appeared for Mr Reed. Some orders were made by consent. Again, there was a lengthy preamble which set out the extent of the parties’ matrimonial property and their liabilities. It detailed the parties’ employment and, in particular, that Mr Reed was working as a labourer in the Region J because he was not then able to be a tradesman.[18]
[18] See orders of Judge Brown dated 20 May 2021 at Notation J.
The agreement was reached at the financial Conciliation Conference with Registrar De Corso. An order was made in terms of what the parties had agreed. It was agreed between the parties that the B Street, Town C property would be sold.[19]
[19] See orders of Judge Brown dated 20 May 2021 at order (2).
That order also dealt with superannuation issues, and there were some requirements that the trustees involved had to be notified of what the parties wanted to do in respect of splitting, so there was a delay in the formalisation of the orders.
The next thing that occurred was that in June of 2021, Ms Reed brought an Application in a Case, seeking that Mr Reed vacate the B Street, Town C property so that it could be sold in terms of the orders.[20] This was followed by an Amended Application in a Case filed in August.[21]
[20] See Application in a Case of Ms Reed filed on 24 June 2021.
[21] See Application in a Case of Ms Reed filed on 15 August 2021.
She filed an affidavit in support of her application.[22] By way of background, she deposed that Mr Reed had told her that he would be quite content for the bank to foreclose and take possession of the properties, the import of her evidence being that Mr Reed would prefer to spite her, rather than do something that was economically sensible.
[22] See Affidavit of Ms Reed filed 21 June 2021; see Affidavit of Ms Reed filed 15 August 2021.
She had said also that she would be able to retain the D Street, Town E property on the condition that she would obtain finance, which is dependent on the sale of the B Street, Town C property. As I recall, she is a tradesperson, and she is secure in her employment, but her annual remuneration is relatively modest, about $70,000.00 per annum.[23]
[23] See Affidavit of Ms Reed filed 11 December 2020 at [13].
At that stage, it was the wife’s position that although there was an order for the sale of the B Street, Town C property, to which Mr Reed had agreed, and which had been his position in the proceedings throughout, he was being passively resistant to the process of sale. He was in living in the property and showing no signs of vacating it.
He would not let anybody inspect it, and it was not being maintained or well‑presented. That Application in a Case came to court ultimately in August, and Ms Davies, the duty solicitor, assisted Mr Reed. I cannot recall what was said on that occasion, but I think I was told that Mr Reed was wanting to sell the property. In any event, I directed that Ms Peters obtain all the details of the offers that had been made in respect of the property by the next day, and the case was adjourned until 19 August 2021.
Mr Reed appeared on his own behalf on 19 August. As I recall, he was not a happy person. Many people who come into my court are not particularly happy. I acknowledge that the circumstances relating to coming to court are often challenging, but from my perspective – and certainly from Ms Reed’s perspective – there was an urgency about it all.
The bank was pressing. There was an order for sale. The proceedings by that stage had been on foot for a relatively significant period of time. I had come to Mount Gambier to discharge my responsibilities on the circuit. Ms F had also withdrawn from the case.
The duty solicitor was not prepared to assist Mr Reed anymore. Mr Reed had not filed any documents, so I directed that he vacate the property within seven days.[24] He was directed to withdraw furniture and items of property, and a real estate agent was directed to sell the property. A reserve was set, and I ordered that Mr Reed pay Ms Reed’s costs.
[24] See orders of Judge Brown dated 20 August 2021 at order (1).
Mr Reed is not the sort of person, and I mean him no disrespect, who is inclined to dutifully obey the directions of those in authority. He is entitled to have his own view of life, but it is my responsibility to adjudicate disputes between parties according to the law. In so doing, I have to think about the integrity of the system as a whole.
Regrettably, marital breakdown is common in our community. The Family Law Act 1975 (Cth) (hereinafter referred to as “the Act”) is a piece of beneficial legislation. It provides fair mechanisms for people, usually after a relationship breaks down, to make appropriate arrangements for the division of property, and the care of children.
Those processes are emotionally challenging, but there has to be a process to manage them, and it has to be done according to the law. I did not compel either Ms Reed or Mr Reed to come into court. They came into court because the marriage between them had broken down. They jointly owned property. They had competing equitable interests in those properties. Those issues had to be determined.
To their credit, ostensibly at least, they resolved them, and orders were made. Other people who come to court in similar circumstances of the parties in this matter are entitled to know that if they come to an agreement, or indeed if the court adjudicates the matters in dispute between them, the orders that are subsequently made are enforceable and binding, and if necessary, the authorities will be directed to give force to them.
Mr Reed was disinclined to leave the property. Over the period that followed, he made an application for more time to comply with the orders. In effect, what had occurred, was that he had got a well-paid job in primary industry in Country K.[25]
[25] See Affidavit of Mr Reed filed 18 October 2021 at [20].
In those circumstances, it was his view that he was entitled to revisit the agreement and the orders that had been made, in respect of his agreement with Ms Reed. Ms Reed may have been open to revisiting those orders, but she was not required to.
Clearly, she had no great trust for Mr Reed, who had consistently displayed to her that he was not a person of his word or a person who could be trusted. Anyway, she had the order. She was entitled to put it into effect. Mr Reed instructed solicitors. I declined to give him more time, although in effect, he had had that time. The case was adjourned again.
Ultimately, a warrant had to be issued for the possession of the property. Mr Reed appeared on his own behalf. He has no obligation to be polite and courteous to me. I am grateful when people are, but I accept he does not have to be polite to me, but I note for the record that he was truculent, abusive and threatening. He has not appeared today, and he knows the proceedings are on foot, and I am disinclined to pursue him or beg him to take part in these proceedings.
Recently, Ms Reed has updated the court as to what has happened. The sheriff of the Marshal of the court has ultimately seized the property. Mr Reed had placed people – tenants, I do not know, friends of his, in the property.
Ultimately, they had to be removed, and from Ms Reed’s perspective, the property was left in a terrible state of disrepair. She has been put to considerable expense. She estimates her out-of-pocket legal costs in an amount of approximately $24,000.00.[26] The property has now been sold. The parties’ debts, as they agreed over about 12 months ago now, have finally been paid. The financial misfortune of these proceedings has been compounded for not only the wife, but also for Mr Reed.
[26] See Affidavit of Ms Reed filed 16 March 2022 at [23].
THE LEGAL PRINCIPLES APPLICABLE
Actions must have consequences, to some degree. Ms Reed seeks that she be paid party/party costs or indemnity costs.[27] The rules relating to the payment of costs are set out in section 117 of the Act.
[27] See Amended Application (Enforcement) of Ms Reed filed 15 October 2021.
Section 117(1) abolishes, for the purposes of family law proceedings, the general rule that in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in such proceedings.
As I say, the Act is a beneficial piece of legislation, and it is for that reason that costs are not generally in issue. The court is meant to be a helping court, and people are meant to be assisted to resolve the issues in dispute between them in a cost-effective and a civilised manner.
The parties were given a Conciliation Conference. Ostensibly, at least, they settled the matter. If Mr Reed had honoured what he agreed to, there would be none of this imbroglio about costs. Accordingly, the court is empowered with the discretion, pursuant to section 117(2) to make an order for costs if there are circumstances which justify it in so doing. That is not an unfettered discretion.
It is controlled by a number of considerations contained in section 117(2A). I have to consider a number of matters:
•the financial circumstances of each of the parties to the proceedings;
•whether any party to the proceedings is in receipt of Legal Aid;
•the conduct of the parties to the proceedings, including in respect of issues of discovery or production of documents;
•whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court;
•whether any party to the proceedings has been wholly unsuccessful in the proceedings;
•whether any party has made any offer in writing to settle the proceedings, and the terms of any such offer; and
•any other matters as the court considers relevant.[28]
[28] See Family Law Act 1975 (Cth) ss 117(2A)(a)-(g).
Accordingly, the court’s discretion to make an order for costs is a wide one, and includes the authority to make an order for indemnity costs. However, as I say, the discretion remains one which must be exercised carefully and judicially. In the Marriage of I & I (No 2), the Full Court said as follows:
Section 117 confers upon the court a broad discretion in relation to costs. That discretion is one which the court should not seek to fetter. As was pointed out by the High Court in Penfold & Penfold, it is an accurate expression of section 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to section 117(2), as subsection (1) is expressed to be subject to subsection (2). The former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order. Subsection (2) requires a finding of justified circumstances as an essential preliminary to the making of an order.[29]
[29] In the Marriage of I & I (No 2) (1995) 22 Fam LR 557, 558 (Nicholson CJ, Ellis and Buckley JJ), quoting Penfold & Penfold (1980) 144 CLR 311, 315 (Stephen, Mason, Aickin and Wilson JJ).
DISCUSSION
I turn to those matters in section 117(2)(a). Ms Reed is a modest income-earner. The marriage between the parties has been a financial disaster for each of them, but particularly Ms Reed. Mr Reed is now apparently on his feet financially, but other than knowing he works in Country K, I know little about him, and he has failed to delineate his circumstances to any great degree.
More significantly, I have to consider the conduct of the parties, and whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court. Undoubtedly, in my view, in this case, Mr Reed has failed to comply with numerous directions and orders of the court.
To some extent, he has been prepared to thumb his nose at the court, the irony being that at the outset of the proceedings, he conceded that this property needed to be sold, and he agreed to its sale. Thereafter I am satisfied he has been actively and passively resistant to the court’s processes.
It is a significant thing, given the nature of family law proceedings, to make an order for indemnity costs. In the Full Court in the case of In the Marriage of Kohan, it is said ‘the court should not depart lightly from the ordinary rules relating to costs between party and party, and the circumstances justify the departure should be of an exceptional kind’.[30] As I say, I accept these proceedings were emotionally challenging for Mr Reed who, I suspect, has not got the background and the resilience to deal with their challenges easily.
[30] In the Marriage of Kohan (1992) 16 Fam LR 245, 258 (Strauss, Lindenmayer and Bulley JJ).
He needs support and help. He had a solicitor. He took her advice perhaps – I do not know, but he is an adult in the world, and he has obligations not only to himself, but also to his former partner. It is also regrettably not unknown for a party to be motivated by malice in how they approach these types of cases.
Certainly that is Ms Reed’s view, as she deposed earlier, that Mr Reed was prepared to leave her salted earth, and himself too, out of his disdain for her. In my view, this is the type of case which justifies an award of significant costs on an indemnity basis.
Pursuant to the court’s rules – and they are currently the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the court has a wide discretion as to how it can calculate costs.
Pursuant to rule 12(17), it may order costs in a specific amount, or to be assessed on a particular basis, including in respect of indemnity costs. In my view, this is the type of case which does, as I say, call for an award of indemnity costs.
I will direct that the husband pay the wife’s costs fixed in the amount of $24,000.00, which she is authorised to deduct from any settlement moneys that is due to the husband pursuant to the orders of the court.
For all of these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of Judge Brown. Associate:
Dated: 7 April 2022
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