RILEY & MASSALSKI
[2020] FamCA 389
•25 May 2020
FAMILY COURT OF AUSTRALIA
| RILEY & MASSALSKI | [2020] FamCA 389 |
| FAMILY LAW – COSTS – Where an application is made by the de facto husband seeking an order that the de facto wife pay his costs of and incidental to the proceedings on an indemnity basis or in the alternative on a party/party basis – Where the de facto wife opposes the application – Where proceedings were cross-vested from the Supreme Court of Victoria – Where the de facto wife failed to comply with her obligations of disclosure in the substantive proceedings – Where the de facto wife pressed for findings in relation to unmeritorious contentions in the substantive proceedings – Consideration of the conduct of the parties in respect to the proceedings – Whether the de facto wife was wholly unsuccessful – Whether the de facto wife was substantially unsuccessful – Consideration of the outcome of the substantive proceedings – Whether the de facto wife has imprudently rejected a written formal offer of settlement made by the de facto husband – Consideration of written offers of settlement – Orders made for costs in favour of the de facto husband. |
| Family Law Act 1975 (Cth) ss. 117, 117C Family Court Rules 2004 pt. 10.1, r 10.06, 12.07 |
| Bartlett v Coomber (No 2) [2008] NSWCA 282 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 Browne v Green (2002) FLC 93-115 Calderbank v Calderbank [1975] 3 All ER 333 Colgate-Palmolive Co v Cussens Pty Ltd) (1993) 118 ALR 248 D & D (Costs) (No. 2) (2010) FLC 93-435 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123 Harrison v Schipp [2001] NSWCA 13 Hunter v Roberts (No 2) [2019] NSWCA 235 I & I (No 2) (1995) FLC 92-625 Johnston v Johnston (2004) FLC 93-189 Kohan & Kohan (1993) FLC 92-340 Leichhardt Municipal Council v Green [2004] NSWCA 341 Liverpool City Council v Estephan [2009] NSWCA 161 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Marks, Kinross, McCullagh & Williamson v GIO Australia Holdings Ltd (No 2) (1996) 137 ALR 579 Massalski & Riley [2019] FamCA 1013 McFadzean v Construction, Forestry, Mining & Energy Union (No 2) [2007] VSCA 313 Medlon &Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 140 ALR 707 Morgan v Johnson (1998) 44 NSWLR 578 Munday v Bowman (1997) (1997) FLC 92-784 Nemeth & Nemeth (1987) FLC 91-844 New South Wales Medical Defence Union Ltd v Crawford & Bailey (as executrix of the Estate of Bailey) (Chelmsford case) (1993) 31 NSWLR 469 Ofria v Cameron (No 2) [2008] NSWCA 242 Penfold v Penfold (1980) FLC 90-800 PennisivPennisi (1997) FLC 92-774 Prantage & Prantage (2013) 49 Fam LR 197 Prantage v Prantage (Costs) [2014] FamCA 850 Renald &Renald (Costs) (2018) FLC 93-819 Robinson & Higginbotham (1991) FLC 92-209 Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103. Skalkos v Assaf (No 2) [2002] NSWCA 236 Somers & Ettridge [2020] FamCAFC 37 Stoian & Fiening (Costs) [2014] FamCA 944 Westpac Banking Corp v Ollis [2007] NSWSC 1008 White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 |
| APPLICANT: | Mr Riley |
| RESPONDENT: | Ms Massalski |
| FILE NUMBER: | SYC | 496 | of | 2015 |
| DATE DELIVERED: | 25 May 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland DCJ |
| HEARING DATE: | 6 April 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Coleman SC |
| SOLICITOR FOR THE APPLICANT: | Russell C Byrnes Solicitor |
| COUNSEL FOR THE RESPONDENT: | Ms Skinner |
| SOLICITOR FOR THE RESPONDENT: | Keypoint Law |
Orders
That the Respondent, Ms Massalski, pay the Applicant’s, Mr Riley, costs of and incidental to the following on a party/party basis as agreed or assessed:
(a)Supreme Court of Victoria Proceedings no … 2016/…;
(b)The proceedings herein in respect to the period on and from 24 February 2017.
The costs determined in accordance with order (1) are to be paid within 28 days of being agreed or assessed.
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 Riley & Massalski 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 SYDNEY |
FILE NUMBER: SYC 496 of 2015
| Mr Riley |
Applicant
And
| Ms Massalski |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Application in a Case filed on 21 January 2020, Mr Riley seeks an order for costs in respect to proceedings between himself and Ms Massalski. Those proceedings were finalised by Orders made on 24 December 2019. Mr Riley is the Applicant in these proceedings but was the Respondent in the substantive proceedings. For the purpose of these reasons for judgment, Mr Riley will be referred to as “the Applicant de facto husband”. Ms Massalski was the Applicant in the substantive proceedings but is the Respondent to the Application in a Case before me, and, as such, will be referred to as “the Respondent de facto wife” in these reasons for judgment.
Background
By way of summary, the reasons for judgment I delivered on 24 December 2019 (“the substantive judgment”)[1] held that the Respondent de facto wife withdraw caveats placed by her over the property situated at B Street and C Street, Suburb A, Victoria (“the Suburb A property”), which was jointly owned by the Applicant de facto husband and the Respondent de facto wife’s former husband, Mr K, and caveats placed by her over the property situated at F Street, Suburb G (“the F Street property”).
[1] [2019] FamCA 1013
The Respondent de facto wife was also awarded an amount equivalent to five per cent (5%) of the Applicant de facto husband’s interest in the Suburb A property in the sum of $18,263.50.
The substantive judgment further held that, after strata titles were issued for two (2) units located at the F Street property, the Respondent de facto wife be awarded Lot 1 (Unit 1) and the Applicant de facto husband should be awarded Lot 2 (Unit 2). It was found that Unit 1 was worth approximately $795,000 and Unit 2 was worth approximately $775,000. It was further determined that the Applicant de facto husband would be responsible for repaying an outstanding mortgage in respect to F Street property of approximately $161,740.
Applications
The Applicant de facto husband seeks that orders be made in accordance with those set out in his Application in a Case filed 21 January 2020, as follows:
1. That the Respondent pay the Applicant's costs of and incidental to the following on an Indemnity basis or, in the alternative, on a party/party basis as agreed or assessed:
1.1. Supreme Court of Victoria Proceedings no … 2016/….
1.2. The proceedings herein.
2. That such costs be charged against the property of the Respondent being her interest in the property known as F Street, Suburb G being the whole of the land in Folio Identifier …/….
The Respondent de facto wife seeks that orders be made in accordance with those set out in her Response to an Application in a Case filed 3 April 2020, as follows:
1. The Application in a Case filed 21 January 2020 be dismissed.
2. The Applicant, Mr Riley, pay the costs of the Respondent, Ms Massalski, of and incidental to the Application in case dated 21 January 2020.
Evidence
The Applicant de facto husband relied upon the following documents:
a)Application in a Case filed 21 January 2020;
b)Affidavit of Mr Russell Craig Byrnes, solicitor for the Applicant de facto husband, filed 21 January 2020 and annexures;
c)Written submissions on costs filed 13 March 2020; and
d)Copies of cost agreements, pursuant to Orders made on 6 April 2020.
The Respondent de facto wife relied upon the following documents:
a)Response to an Application in a Case filed 3 April 2020;
b)Affidavit of the Respondent de facto wife filed 3 April 2020;
c)Affidavit of the Respondent de facto wife filed 10 March 2020 and annexures;
d)Defence and Counterclaim filed in the Supreme Court of Victoria dated 5 April 2020;
e)Respondent de facto wife’s list of documents, authorities and objections;
f)Written submissions on costs dated 5 April 2020; and
g)Supplementary written submissions on costs dated 20 April 2020, pursuant to Orders made on 6 April 2020.
Relevant law – concepts and principles
The issue of costs in respect to proceedings under the Family Law Act 1975 (Cth) (“the Act”) is to be determined in accordance with s 117 of the Act. That section relevantly provides that:
(1) Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(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 answer 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;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
Of further relevance is s 117C of the Act, which provides that:
(1) This section applies to proceedings under this Act other than the following proceedings:
(a) proceedings under Part VI;
(b) proceedings under Division 6, 9 or 13 of Part VII;
(c) proceedings to enforce a decree or injunction made under Division 6, 9 or 13 of Part VII.
(2) If:
(a) a party to proceedings to which this section applies makes an offer to the other party to the proceedings to settle the proceedings; and
(b) the offer is made in accordance with any applicable Rules of Court;
the terms of the offer must not be disclosed to the court in which the proceedings are being heard except for the purposes of the consideration by the court of whether it should make an order as to costs under subsection 117(2) and the terms of any such order.
The general rule, as set out in s 117(1) of the Act, is that each party to the proceedings shall bear his or her own costs. This is, however, subject to s 117(2) of the Act which provides that, if the Court is satisfied that there are circumstances justifying it, the Court may make an order as to costs as it considers just. Beyond the “essential preliminary” consideration of those matters set out in s 117(2A) of the Act, there is no “additional or special onus” on the Applicant for the Court to make an order for costs: Penfold v Penfold (1980) FLC 90-800 at 75,054.
The Full Court has held, in I and I (No 2) (1995) FLC 92-625 at 82,277, that the relevant matters in s 117(2A) of the Act “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”.
No one factor under s 117(2A) of the Act prevails over any other factor. Rather, it is a matter of weight that is accorded to each of the relevant factors in the trial judge’s discretion: Medlon &Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 (“Medlon No 6”) at [24] per Strickland J.
In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) (“Fitzgerald v Fish”) 33 Fam LR 123 at [124], the Full Court confirmed that it was not necessary for each of the factors listed in s 117(2A) to be met in order for the Court to make a costs order. The Full Court per Kay, Warnick and Boland JJ stated, when referring to s 117(2A) at [130]:
A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
Contentions
Submissions of the Applicant de facto husband
The Applicant de facto husband primarily relies upon s 117(2A)(f) of the Act in respect to offers of compromise that were made by the Applicant de facto husband to the Respondent de facto wife on 23 December 2015 and 24 February 2017 (“the offers”). It was submitted that the significance of those offers should be considered in the context of the substantive judgment.
It was submitted that, in circumstances where it was found that both parties had property of some significance, s 117(2A)(a) of the Act does not advance the interests of one party against the other and, hence, is not a relevant consideration in this case.
The Applicant de facto husband further submitted that the provision of s 117(2A)(c) of the Act is a relevant consideration, both in respect to determining whether an award for costs should be made and, ultimately, in determining the quantum of costs.
In that respect, it was contended that the manner in which the Respondent de facto wife conducted herself in relation to these proceedings resulted in costs being incurred by the parties which was disproportionate to the issues in dispute. This included, it was contended, conducting herself “at every interlocutory stage, in a manner which prolonged the proceedings [and], complicated them needlessly”.
Comparatively, it was contended that the Applicant de facto husband conducted himself and provided relevant instructions consistent with achieving the “just quick and cheap resolution of the real issues in the proceedings”.
In assessing the question of proportionality, it was noted that, in the introductory paragraphs of the judgment, I recorded my view that, after the Respondent de facto wife’s unmeritorious contentions regarding various equitable claims had been swept away, the case was relatively straightforward and came down to an assessment of the extent of the contributions of each party to the property which they owned individually and jointly.
It was noted, by the Applicant de facto husband, that the Court rejected the Respondent de facto wife’s “purported equitable claims”, including those described as:
·The “Ongoing Riley Representations” (see [377]-[384] of the substantive judgment);
·The “2003 Riley Representations”(see [385]-[387] of the substantive judgment);
·The “2005 Suburb A Ownership Promise” (see [388]-[391] of the substantive judgment);
·The “Suburb A Construction Management Promise” (see [392]-[394] of the substantive judgment);
·The “2005 Riley Representations” (see [395] of the substantive judgment);
·The “Suburb A Construction Loan Promise” (see [396]-[402] of the substantive judgment);
·The “asserted promises concerning the Suburb A property” (see [403] of the substantive judgment);
·The “Resulting Trust Suburb A” claim (see [404] of the substantive judgment); and
·The “Express Trust Suburb A” claim (see [405]-[406] of the substantive judgment).
It was further submitted that, while the Court did not accept the basis upon which the Applicant de facto husband conceded that the Respondent de facto wife should be awarded a five per cent (5%) interest in the Applicant de facto husband’s interest in the Suburb A property (see [407]-[409] of the substantive judgment), that was, in substance, the outcome of the Court’s determination of that issue and that, in effect, “[the Applicant de facto husband] won on that issue”.
The Applicant de facto husband further submitted that, in the context of determining the controversies concerning the F Street property, the Court considered, and determined, in favour of the Applicant de facto husband:
·The “Aunt X Promise” (see [413]-[414] of the substantive judgment);
·The “Suburb G Loan Promise” (see [415]-[425] of the substantive judgment);
·The “Suburb J property” and “Suburb J Inheritance promise” (see [426]-[433] of the substantive judgment);
·The “2006 Riley Representations” (see [434]-[440] of the substantive judgment);
·The “Suburb J Rent Promise” (see [441] of the substantive judgment); and
·The “Suburb J Equity Promise” (see [442]-[443] of the substantive judgment).
It was noted that the Court accepted the argument of the Applicant de facto husband that there should be no adjustment in respect to the parties’ respective interests in the F Street property.
More generally, it was contended that, in order for the Respondent de facto wife to present her case as to what orders she sought to be made to ensure a just and equitable adjustment of the parties’ property, it was unnecessary for her to advance the “unmeritorious claims” set out in the immediately above paragraphs.
The matters identified above were relied upon by the Applicant de facto husband to support his contention that an order for costs should be made in his favour having regard to s 117(2A)(c) of the Act.
It was also submitted that, in terms of s 117(2A)(e) of the Act, the Respondent de facto wife was “wholly” unsuccessful or, in the alternative, that she was substantially unsuccessful.
It was contended that, having regard to offers made by the Applicant de facto husband, an order should be made for costs in his favour pursuant to the provision of s 117(2A)(f) of the Act. Further, it is contended that the Respondent de facto wife’s imprudent rejection of those offers justify an order for costs on an indemnity basis.
The Applicant de facto husband submits that the offer made by him on 23 December 2015 exceeded, by approximately $80,000, the sum awarded to the Respondent de facto wife by the Court. It is contended that “the offer was, on any view, if not generous to [the Respondent de facto wife], one which should have been accepted when the likely costs of the litigation which its rejection would occasion would, and did occasion”.
It was further contended that the second offer made by the Applicant de facto husband, on 24 February 2017, which was formulated on the basis that the Respondent de facto wife receive the Applicant de facto husband’s half interest in the Suburb A property, the other half interest in the property being held by Mr K, was one that the Respondent de facto wife was imprudent in rejecting. It was submitted that, according to the offer, the Respondent de facto wife would have received equity in the Suburb A property of approximately $365,000 together with equity in Unit 1 at the F Street property, approximating $633,000 in value. In total, the Respondent de facto wife would have received equity in the two (2) properties approximating, in total, $998,000.
This compares, it was submitted, with the effect of the Orders of 24 December 2019 which provided the Respondent de facto wife with equity, and cash, approximating $820,000.
Further, it was noted that the offer was made on the basis of the Applicant de facto husband relinquishing his rights with respect to the costs of the Victorian Supreme Court proceedings, which, after their cross-vesting to the Family Court of Australia, have been determined against the Respondent de facto wife.
As noted, the Applicant de facto husband submitted that, in the circumstances identified above, the discretion to award indemnity costs is enlivened.
The Applicant de facto husband’s submission referred to a number of authorities. The relevant principles adumbrated in those authorities are summarised immediately below.
· There is no fixed rule or rationale as to when the discretion to award indemnity costs might be exercised,[2] and the class of case in which indemnity costs is not closed.[3]
· There must, however, generally be either:
o A “sufficient or unusual feature” about a matter to enliven the discretion to award indemnity costs: Colgate-Palmolive Co v Cussens Pty Ltd) (1993) 118 ALR 248 (“Colgate-Palmolive”); or
o Some “relevant delinquency”: Westpac Banking Corp v Ollis [2007] NSWSC 1008 at [6].
· The concept of delinquency is not moral delinquency but delinquency bearing a relevant relation to the conduct of the case: White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 at [11]; Liverpool City Council v Estephan [2009] NSWCA 161 at [91].
· The rationale for indemnity costs has been suggested to be the public policy which, through costs orders, encourages litigants to approach litigation sensibly, and settle cases which should be settled: Marks, Kinross, McCullagh & Williamson v GIO Australia Holdings Ltd (No 2) (1996) 137 ALR 579; Leichhardt Municipal Council v Green [2004] NSWCA 341; New South Wales Medical Defence Union Ltd v Crawford & Bailey (as executrix of the Estate of Bailey) (Chelmsford case) (1993) 31 NSWLR 469.
· Although there is no presumption in favour of an award of indemnity costs, the Applicant de facto husband submitted that, in circumstances of a party failing to secure a judgment more favourable than an unaccepted offer of compromise or Calderbank offer[4] would have provided, indemnity costs should be awarded. The Applicant de facto husband contended, as explained in Morgan v Johnson (1998) 44 NSWLR 578 at [581], the rationale is that costs sanctions following unreasonable rejection of an offer to settle encourages “the proper compromise of litigation, in the private interests of individual litigants, and the public interest of prompt and economical disposition of litigation”, by obliging “the offeree to give serious thought to the risk involved in non-acceptance” of a reasonable offer: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at [724]-[726].
· Whether rejection of an offer to settle was unreasonable involves an evaluative determination requiring a consideration of the facts and circumstances specific to the case: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12.
· The complexity of the real issues is relevant to that determination: MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 140 ALR 707.
[2]Harrison v Schipp [2001] NSWCA 13 at [139].
[3]Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103.
[4]Calderbank v Calderbank [1975] 3 All ER 333.
It was contended that the unreasonable rejection of the Applicant de facto husband’s offers significantly disadvantaged the Applicant de facto husband “by delaying the resolution of the proceedings, and causing [the Applicant de facto husband] to incur costs which he ought not have been obliged to incur”.
It was further contended that the fact “that [the Respondent de facto wife] caused the [Applicant de facto husband] such loss, whilst representing herself from time to time is submitted to render the claim for indemnity costs more persuasive”.
It was submitted the Applicant de facto husband’s offers were genuine offers of compromise, both on their face and in light of the judgment. The Applicant de facto husband relied upon Bartlett v Coomber (No 2) [2008] NSWCA 282 to support this proposition. The Applicant de facto husband opined that the offers also need to be considered in the context of him being “willing to forego any claim to the substantial costs which he had incurred by 2015, and continued to incur thereafter, and after his 2017 offer was rejected”.
It was contended that, in this matter, the offers were not conditional, uncertain or complicated, which, it was contended, are matters relevant to the unreasonableness of their rejection. The Applicant de facto husband relied upon Skalkos v Assaf (No 2) [2002] NSWCA 236 to support this proposition.
It was also submitted that the amount seriously in dispute in the proceedings, relative to the costs of the litigation to judgment, support an order for indemnity costs. The Applicant de facto husband referenced Ofria v Cameron (No 2) [2008] NSWCA 242 in support of this proposition.
It was noted that the claim for indemnity costs is not asserted, by the Applicant de facto husband, “solely on the basis that [the Respondent de facto wife] secured a materially less advantageous verdict than the offers provided”, but rather “by reference to the terms of the offers, and all relevant surrounding circumstances, as found by the trial judge (King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) (2009) NSWCA 204)”.
Finally, it was submitted that “the manifest unreasonableness of the offers made by [the Respondent de facto wife] reinforce a finding that [the Applicant de facto husband’s] offers were unreasonably rejected”.
Submissions of the Respondent de facto wife
Fundamentally, it was contended that there is no basis for the making of an order for costs on an indemnity basis against the Respondent de facto wife.
Against the legislative backdrop of s 117(1) of the Act, an order for indemnity costs represents “a very great departure from the normal standard”: Kohan and Kohan (1993) FLC 92-340 (“Kohan”) at 79,605.
The Respondent de facto wife disputes the Applicant de facto husband’s contentions that:
a. There is a “sufficient or unusual feature” or some “relevant delinquency”;
b. Her rejections of the written offers dated 23 December 2015 and 2 February 2017were ‘unreasonable’;
(Citations omitted)
As such, it is submitted that none of the circumstances described in Colgate-Palmolive (supra), as summarised by Holden CJ in Munday v Bowman (1997) (1997) FLC 92-784 (“Munday v Bowman”) at 84,660 exist in this case.
More broadly, it was submitted that any exercise of the Court’s discretion to award costs (whether on an indemnity or party/party basis) must primarily be informed by s 117(2A) of the Act.
It was noted that, in the Full Court decision of Robinson & Higginbotham (1991) FLC 92-209 (“Robinson & Higginbotham”) at 78,417, Nygh J (with Simpson and Smithers JJ agreeing) commented that:
[i]f one looks at the matters set out in s 117(2A) and in my view, those are the only matters that are relevant – we are not much assisted by what happens under other jurisdictions, either by way of common law or of other provisions…
Accordingly, it was submitted that although the principles outlined by counsel for the Applicant de facto husband in paragraphs 25 and 26 of the Applicant de facto husband’s submissions may be of some assistance, they are not binding upon this Court.
It was submitted that the exceptional nature of the circumstance(s) required for ordering a party to pay indemnity costs has been confirmed in Meldon & Meldon (No. 6) (Indemnity Costs) (2015) 54 Fam LR 1 at [27]. It was further contended that consideration as to whether indemnity costs should be ordered “already contemplate[s] an order for party-party costs taking into account ‘disproportionate’ use of resources or a situation where a party’s conduct increases the complexity of the proceedings, the situation that calls for an order for indemnity costs must be exceptional”.
It was also submitted that the Applicant de facto husband has failed to comply with the requirement to inform the Court if he is bound by a costs agreement in relation to the costs and, if so, the terms of the costs agreement as required by the Family Court Rules 2004 (Cth) (“the Rules”). In that respect, reference was made to Prantage & Prantage (2013) 49 Fam LR 197 at [154] and Kohan (supra) at 79,611 where it was held that:
…the degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
It was, therefore, submitted that the Applicant de facto husband’s Application for costs on an indemnity basis should be dismissed.
In respect to the issue of party/party costs, it was submitted that the presumption set out in s 117(1) of the Act ought to be upheld and that there are no circumstances justifying a departure from that presumption.
In terms of s 117(2A)(c) of the Act, it was submitted that it is incumbent upon the Court to assess the contribution of both parties in relation to the conduct of the whole proceedings.
In that respect, “the delinquencies” of the Applicant de facto husband were highlighted, including the contention that “at various stages of the proceedings” the Applicant de facto husband:
·engaged in conduct “that has contributed to delays and complexities of the proceedings and a disproportionate accrual of his own legal costs. He has engaged silk in an ‘essentially straightforward’ matter”;
·“wasted time by pursuing ultimately unsuccessful issues (two applications for partial property settlement and objecting to the Family Law jurisdiction)”;
·“caused unnecessary appearances and adjournments”;
·“failed to make adequate disclosure”; and
·Commenced a Counterclaim in the Supreme Court of Victoria which, it was contended, “was essentially an abuse of the court process, having regard to the existing Family Court orders”.
It was, therefore, submitted that, having regard to both parties’ conduct, the Respondent de facto wife’s conduct does not justify a departure from s 117(1) of the Act.
In respect to s 117(2A)(e) of the Act, it was contended that the Respondent de facto wife was not “wholly unsuccessful” in the proceedings. Reference was made to the judgment of Nygh J in Robinson & Higginbotham (supra) at 78,417 which considered the meaning of “wholly unsuccessful”. It was noted that his Honour found that the term is aimed at “a situation in which the proceedings as a whole have been unsuccessful. In other words, in which an application which was without merit has been dismissed.”
It was submitted that his Honour considered the circumstance where “a party has brought a proceeding in this court totally without any merit which is summarily dismissed” and held that “in those circumstances, para (e) would become of great weight and importance and it would be difficult in that case, unless there were some peculiar circumstances, to resist an argument that costs should be awarded against the unsuccessful party because that is what para (e) is all about”.
It was submitted that, in this case, while the Respondent de facto wife’s claims for equitable interests in the properties were unsuccessful, she was not “wholly unsuccessful” in the proceedings. In that respect, it was noted that the Applicant de facto husband sought the following orders until the conclusion of the trial:
a. That [the Respondent de facto wife] retain Unit 1 of the Suburb G property; and
b. That [the Respondent de facto wife] pay to [the Applicant de facto husband] $92,000.
As against what was sought by the Applicant de facto husband, it was noted that the judgment ordered that:
a. [the Respondent de facto wife] retain Unit 1 of the Suburb G property; and
b. [the Applicant de facto husband] pay $18,000 to [the Respondent de facto wife].
It was submitted that the Respondent de facto wife was, therefore, $110,000 better off than if her Application had been “wholly unsuccessful”.
In terms of s 117(2A)(f) of the Act, it was submitted that there should be minimal, if any, weight given to the offers in writing made by the Applicant de facto husband on 23 December 2015 and 24 February 2017.
In that respect, it was submitted that the purpose and effect of s 117(2A)(f) is summarised by Nygh J in Robinson & Higginbotham (supra) at 78,417. Specifically, it was contended that determination of this ground requires consideration of whether the offers were “made seriously”: Johnston v Johnston (2004) FLC 93-189. It was submitted that there must also be consideration of the circumstances in which the offer was made, noting:
a. The offer dated 23 December 2015 was not made seriously due to the lack of any meaningful disclosure by [the Applicant de facto husband] at the time of making the offer and for some time following the offer. [The Respondent de facto wife] therefore could not ‘carefully assess all the material, including discovered material, to determine the strengths and weaknesses of’ her case… and therefore the offer ought receive little to no weight.
b. The offer dated 2 February 2017 was not ‘made seriously’ due to the fact that it required [the Respondent de facto wife] to assume a further EST$600,000 of debt (where the repayments at the time were approximately $4000 per month). At the time, [the Applicant de facto husband] was aware that [the Respondent de facto wife] earned $1383 (after tax and superannuation) and had a current garnishee order which deducted $1548 per fortnight. [The Applicant de facto husband] was therefore aware or ought to have been aware that [the Respondent de facto wife] could not obtain such a loan and therefore the performance of such an offer was impossible. Further, an analysis of the terms of the offer reveal that [the Respondent de facto wife] would not have received a greater proportion of the assets should she have accepted such an offer. This offer therefore should be given no weight.
(Citations omitted)
In respect to the proceedings cross-vested from the Supreme Court of Victoria, it was submitted that:
Whilst [the Respondent de facto wife] did commence proceedings in the VSC in relation to the caveat, there are significant matters to note:
a. [The Respondent de facto wife] commenced these proceedings in response to [the Applicant de facto husband] filing a lapsing notice;
b. These proceedings were continued by [the Applicant de facto husband] as he not only filed a defence, but also a counterclaim, which sought he sale of the Suburb A property in circumstances were the Family Court had already made orders restraining him from selling the property.
c. [The Respondent de facto wife] attempted to file an application to transfer the proceedings before the filing of the D & CC [Defence and Counter Claim];
d. Before [the Applicant de facto husband’s] filing of the D & CC, Mr K and [the Respondent de facto wife] had come to the agreement whereby K acknowledged [the Respondent de facto wife’s] equitable interest in share of the Suburb A property and [the Respondent de facto wife] was to withdraw her claim against Mr K.
It was submitted that, by the Applicant de facto husband accepting jurisdiction of this Court “and then by consent, transferring the proceedings to be heard by this Court, he has conceded that the determination of the issues in dispute is governed by the Family Law Act 1975. It follows that in regard to costs of those proceedings, section 117 of the Act applies.”
In reference to the application of s 117 of the Act, it was further submitted:
Whilst the court dismissed [the Respondent de facto wife’s] application in relation to her claim to equitable interests, she was not ‘wholly unsuccessful’ in relation to the proceedings as a whole (discussed above) and there were no offers of compromise made in relation to the SCV proceedings.
It was further submitted that the Applicant de facto husband “by his own conduct unnecessarily accrued legal costs” in terms of s 117(2A)(c) of the Act. This included:
·The Applicant de facto husband filing a lapsing notice on 1 November 2016 and, by that time, he had already submitted to the jurisdiction of this Court;
·After the lapsing notice being filed, the only way that the Respondent de facto wife could maintain the caveat over the property was to file a Summons, which she did on 23 December 2016; and
·The Respondent de facto wife’s recognition that this Court was the proper forum for the adjudication of the removal of the caveat, given that this Court was already seized of the proceedings.
Having regard to the above, it was therefore submitted that it was “[the Applicant de facto husband’s] conduct which prompted the existence of those proceedings. Further, by filing the D&CC seeking sale of the property (which sought orders which were in directly contradiction to the previously made Family Law orders) and adding Mr K, [the Applicant de facto husband] prevented the matter from being expeditiously transferred to the Family Court, thereby prolong[ing] the proceedings.”
Accordingly, it was submitted that “any legal costs incurred as a result of the SCV proceedings were a result of [the Applicant de facto husband’s] own conduct. It is submitted that the circumstances do not justify the making of an order for costs and therefore each party ought to bear their own costs in accordance with s 117(1) of the Act.”
Consideration
The first question that must be determined is whether the Applicant de facto husband, who makes this Application, has established circumstances justifying an order for costs which displaces the position articulated in s 117(1) of the Act. It is not necessary to establish extraordinary or exceptional circumstances, however, there must be circumstances which, at the absolute discretion of the Court, justify a costs order: Stoian & Fiening (Costs) [2014] FamCA 944 at [19].
In considering whether it is appropriate and just to make an order for costs in favour of a party, it is unnecessary for the Court to be satisfied in respect to each and every factor set out in s 117(2A) of the Act: Fitzgerald v Fish (supra) at [41]. Nor does any factor set out in s 117(2A) of the Act have priority over another: Prantage v Prantage (Costs) [2014] FamCA 850 at [12].
The Applicant de facto husband primarily relies upon s 117 (2A)(f) as justifying an order for costs in his favour in this matter. In Robinson & Higginbotham (supra) at 78,417, Nygh J described the purpose of that paragraph in the following terms:
… when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.
The Full Court has confirmed, in Fitzgerald vFish (supra) at [41], that it is not necessary for each of the factors listed in s 117(2A) of the Act to be met in order for the Court to make a costs order. Kay, Warnick and Boland JJ stated, when referring to s 117(2A) of the Act, at [41] that:
Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
I will, nonetheless, give consideration to each of those matters set out in s 117(2A) of the Act.
Financial circumstances of the parties
In terms of s 117(2A)(a) of the Act, neither party contended that the financial circumstances of either of the parties is relevant to the exercise of my discretion as to whether to make an order for costs in this matter.
Receipt of assistance by way of Legal Aid
Neither party was legally aided and, accordingly, s 117(2A)(b) of the Act is not a relevant consideration.
Conduct of the parties in respect to the proceedings
In terms of section 117(2A)(c) of the Act, I note that the Applicant de facto husband initially opposed the Respondent de facto wife’s Application on the basis that he contended that the Application had been filed at a point in time that was subsequent to two (2) years after the expiration of the parties’ de facto relationship. The Respondent de facto wife’s Initiating Application was filed on 30 January 2015 which was more than two (2) years after I determined that the parties’ de facto relationship had ended. Accordingly, there was substance to the issue raised by the Applicant de facto husband. Nonetheless, by Orders made, with the consent of the parties, on 11 March 2016, the Respondent de facto wife was granted leave to apply out of time. Although costs were reserved in respect to the issue of leave being granted to the Respondent de facto wife, in light of the responsible attitude taken by the Applicant de facto husband in agreeing to leave being granted for the Respondent de facto wife to proceed with her Application, I make no order for costs against him as a result of the fact that he initially took issue with the Respondent de facto wife commencing proceedings out of time.
As I noted at the commencement of the substantive judgment, “after the unmeritorious contentions” of the Respondent de facto wife were swept away, the case came down to essentially straight-forward issues involving an assessment as to the extent of the contributions the parties had made to the property which they owned individually and jointly.
The Respondent de facto wife presented extensive argument with a view to establishing that she had an equitable interest in what was described in the proceedings as the F Street property, the Suburb A property, the Suburb J property and the property in which the Applicant de facto husband lives with his current partner in Suburb E. Those contentions were made in circumstances where the Respondent de facto wife failed to present evidence to substantiate a legitimate basis for making those claims. I took the course of summarising her evidence and explaining its inadequacy at [137]-[309] of the substantive judgment.
Based on that inadequate evidence, the Respondent de facto wife claimed to have an equitable interest in respect to each of the properties to which I have referred. She made these claims on the basis of a cascading series of alternatives referred to at [373], [410] and [427] in the substantive judgment. The Respondent de facto wife persisted with attempting to establish such equitable interests, which included filing two (2) sets of written submissions totalling 86 pages together with extensive submissions in reply.
In short, the Respondent de facto wife conducted these proceedings in a manner that caused unnecessary complexity and expense in circumstances where all that was reasonably required was for the Respondent de facto wife to focus upon the parties’ respective contributions and future needs as contemplated by s 90SM and 90SF of the Act.
A further issue of concern is the inadequacy of disclosure provided by the Respondent de facto wife in the substantive proceedings. I set out the reasons for my concern at [79]-[101] in the substantive judgment. The non-disclosure was so significant that it was simply not possible to identify the Respondent de facto wife’s superannuation interests, the totality of her investments, or what had happened with the proceeds of the sale of her unit in the W Street Complex at Suburb G.
Counsel for the Respondent de facto wife argued that the Court should not consider the Respondent de facto wife’s non-disclosure in respect to the question of costs because the Respondent de facto wife has already paid a penalty for non-disclosure insofar as the Court drew adverse inferences against her in circumstances where there was a lacuna in evidence as a result of her non-disclosure. The fact that such adverse inferences where drawn does not, however, mean that such non-disclosure cannot be considered in respect to costs.
In that context, it is to be noted that s 117(2A)(c) of the Act specifically refers to a party’s failure to comply with their obligation in respect to discovery. In Nemeth and Nemeth (1987) FLC 91-844 at 76,385 the Full Court noted:
The Family Law Act demonstrates by its terms that it is aimed at early resolution of disputes, where this is possible. Inadequate disclosure almost inevitably prevents there being a properly based approach to the question of settlement. Where the case goes to trial inadequate disclosure may lead to delays, sometimes requiring adjournment; invariably it leads to more protracted and costly proceedings. The failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs.
The non-disclosure by the Respondent de facto wife in the trial was such that it prevented the possibility of any meaningful discussions between the parties to resolve the matter and made the contested hearing inevitable. It is, therefore, a matter that is relevant to my decision to award costs against her.
Compliance with orders of the court
Neither party addressed the Court in respect to the provision of s 117(2A)(d) of the Act. Accordingly, I will not consider that factor.
Outcome of the substantive proceedings
In terms of s 117(2A)(e) of the Act, the orders sought by the Respondent de facto wife in the substantive proceedings were set out at [67] of the substantive judgment. Save to the extent that it is arguable that the Respondent de facto wife was successful in respect to one issue, the fact remains that the Respondent de facto wife was wholly unsuccessful in obtaining the orders that she sought.
The one aspect of the substantive proceedings where the Respondent de facto wife was partially successful was in respect to the Court making an Order that she be paid, from the property of the parties, the sum of $18,263.50.[5] That Order was made on the basis of a finding that the Respondent de facto wife was entitled to an adjustment in respect to the Suburb A property equivalent to five per cent (5%) of the Applicant de facto husband’s net interest in that property. This was in the context where, in her proposed Minute of Order, the Respondent de facto wife sought an order requiring the Applicant de facto husband to transfer the totality of his interest in the Suburb A property to her. Moreover, Order 11 of the Orders made on 24 December 2019 was consistent with the substance of the Applicant de facto husband’s contentions where he conceded that the Respondent de facto wife should be found to have a five per cent (5%) equitable interest in the Suburb A property. In other words, despite the fact that the judgment did not accept the basis upon which the concession was made by the Applicant de facto husband, the outcome was, in substance, consistent with his concession.
[5] Order 11 of Orders made on 24 December 2019.
In any event, s 117(2A)(e) of the Act requires the Court to consider whether a party had been wholly unsuccessful in the proceedings. The Respondent de facto wife was wholly unsuccessful in obtaining the relief she sought. This includes her failure to obtain the relief she sought in the proceedings cross-vested by the Supreme Court of Victoria.
Written offers of settlement
Under pt 10.1 of the Rules, parties are encouraged to make an offer to settle to the other party in an effort to resolve a case. Specifically, in matters concerning property, the Rules require parties to make an offer to settle in circumstances as set out in r 10.06.
In Browne v Green (2002) FLC 93-115 at [57], the Full Court stated:
We think that whilst s 117(2A) does not provide any direct guidance to where weight should be given in any one particular case, it is very important for the Court to give proper consideration to written offers of settlement that have been made. The insertion of s 117C into the legislation is a clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. It is clearly a circumstance that would justify the making of an order for costs in favour of the husband.
In Robinson & Higginbotham (supra), Nygh J at 78,417, in respect to s 117(2A)(f), stated:
…paragraph (f) does not have any particular priority, but its importance must surely be weighed in the light of all the circumstances of the case… when one looks at paragraph (f) it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition.
The Full Court, in PennisivPennisi (1997) FLC 92-774 (“Pennisi”) at 84,547, confirmed that:
Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
By letter dated 23 December 2015, in accordance with Orders made by the Court on 16 December 2015, the Applicant de facto husband made a formal offer of settlement to the Respondent de facto wife. The 23 December 2015 offer specified that the offer was made “under division 10.1.2 of the Family Law Rules” and was in the following terms:
1.That both parties do all things and sign all documents necessary to effect the registration of the proposed plan of subdivision of the property known as F Street, Suburb G.
2. That upon registration of the plan of subdivision of F Street, Suburb G both parties do all things and sign all documents necessary to transfer to [the Respondent de facto wife] Unit 1 and to transfer Unit 2 to [the Applicant de facto husband].
3. That [the Respondent de facto wife] retain for her sole use Unit 1 in the proposed subdivision and [the Applicant de facto husband] retain for his sole use Unit 2.
4. That [the Applicant de facto husband] indemnify [the Respondent de facto wife] with respect to the mortgage to the Commonwealth Bank currently registered over F Street, Suburb G.
5. That [the Applicant de facto husband] pay to [the Respondent de facto wife] the sum of One Hundred Thousand Dollars by way of property settlement within 6 months of the date he becomes the sole registered proprietor of Unit 2 or upon the sale of Unit 2 whichever be the earlier.
6. That each of the parties retain for their sole use and be declared the sole and exclusive owner of all other property registered in their name or in their exclusive possession as at the date of this order including superannuation.
7. That [the Respondent de facto wife] remove all caveats she has lodged over property registered in the name of [the Applicant de facto husband] within 14 days.
By letter dated 27 May 2016, the Respondent de facto wife wrote to the solicitor for the Applicant de facto husband making what she described as an “offer of interim settlement”. That letter did not address the 23 December 2015 offer made by the Applicant de facto husband and broadened the terms of the “interim offer” to include the Applicant de facto husband transferring his share in the development of the Suburb A property to the Respondent de facto wife “subject to an agreement being made with [Mr K] that the house in C Street will be registered under [the Respondent de facto wife’s] name”.
By letter dated 7 February 2017, the Respondent de facto wife made a formal offer of settlement to the Applicant de facto husband which she identified as being “pursuant to Order of the Family Court”. The terms of that offer were as follows:
1. That [the Applicant de facto husband] transfers his share of the property in B Street, Suburb A to [the Respondent de facto wife].
2. That [the Respondent de facto wife] repays the loan owing by [the Applicant de facto husband] to the Commonwealth Bank, drawn for the purchase of his share of the land in B Street, Suburb A South, and his share of the construction loan jointly drawn with Mr K.
3. That the Unit ‘2’, F Street, F Street, will be sold by a public auction.
4, That after repaying the loan owing to the Commonwealth Bank, legal and agent's fees, the proceeds from the sale of unit ‘2’ will be divided as follows:
a) 20% of the proceeds will be paid to [the Respondent de facto wife].
b) The balance will be paid to [the Applicant de facto husband].
5. That upon settlement with the purchaser of Unit ‘2’, the strata plan will be registered where Unit ‘2’, will be registered in the name of [the Respondent de facto wife] and [the Applicant de facto husband] as joint tenants and Unit ‘1’ will be registered in the name of [the Respondent de facto wife] as a sole owner.
By letter dated 24 February 2017, the Applicant de facto husband made a further offer to the Respondent de facto wife which was also expressed to be “made under Division 10. 1. 2 of the Family Law Rules 2004”. That offer was in the following terms:
1. That [the Applicant de facto husband] transfer to you all his right title and interest in the property known as B Street, Suburb A, Victoria being the land in Certificates of Title Volume … Folio … and Volume … Folio … subject to all loans/mortgages thereon and you indemnifying [the Applicant de facto husband] with respect to such loans/mortgages.
2. That upon registration of the proposed Strata Plan of F Street, Suburb G both parties do all things and sign all documents necessary to transfer to [the Respondent de facto wife] Unit 1 and to transfer Unit 2 to [the Applicant de facto husband].
3. That the loan/mortgage to the Commonwealth Bank over F Street, Suburb G be discharged over Unit 2 and be only secured over Unit 1 and that you indemnify [the Applicant de facto husband] with respect to such loan/mortgage.
4. That the proceedings in the Supreme Court of Victoria being … of 2016 be dismissed with each party to pay their own costs of such proceedings.
5. That within 7 days of this offer you return to [the Applicant de facto husband] his laptop computer.
6. That each of the parties retain for their sole use and be declared the sole and exclusive owner of all other property registered in their name or in their exclusive possession as at the date of this order including superannuation.
As at 23 December 2015, there was a live issue between the parties as to whether the Respondent de facto wife would be in a position to proceed with her substantive application, in circumstances where the Applicant de facto husband contended that her Application for relief had been filed out of time. I accept that, until that issue was resolved, the Respondent de facto wife would have been negotiating from a position of disadvantage. I further accept that it may not be unreasonable to reject an offer made at a very early stage of the proceedings, in circumstances where, at the time the offer is made, the recipient of the offer is not in a position to effectively assess the strength of their position in respect to the litigation: see Pennisi (supra); Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [22]; and McFadzean v Construction, Forestry, Mining & Energy Union (No 2) [2007] VSCA 313 at [9].
Accordingly, I do not find that the Respondent de facto wife acted unreasonably in failing to accept the offer of 23 December 2015. However, for reasons which I subsequently set out, in considering the offer in respect to indemnity costs, I am satisfied that she acted imprudently in rejecting the subsequent offer made by the Applicant de facto husband by letter dated 24 February 2017.
Other relevant matters
Even if it would be held that I am wrong in determining that the Respondent de facto wife has been wholly unsuccessful, it is clear that an outcome in which a party achieves only limited success is a matter that can be taken into consideration in respect to the issue of costs: Renald &Renald (Costs) (2018) FLC 93-819 at [16]-[17].
In this matter, the only success that the Respondent de facto wife had was achieving an outcome that was conceded by the Applicant de facto husband, being an award of an amount equivalent to five per cent (5%) of the Applicant de facto husband’s net interest in the Suburb A property. On the other hand, I accept and agree with the submission of senior counsel for the Applicant de facto husband that the face of the judgment indicates the Respondent de facto wife was unsuccessful in respect to the following issues:
·The “Ongoing Riley Representations” (see [377]-[384] of the substantive judgment);
·The “2003 Riley Representations”(see [385]-[387] of the substantive judgment);
·The “2005 Suburb A Ownership Promise” (see [388]-[391] of the substantive judgment);
·The “Suburb A Construction Management Promise” (see [392]-[394] of the substantive judgment);
·The “2005 Riley Representations” (see [395] of the substantive judgment);
·The “Suburb A Construction Loan Promise” (see [396]-[402] of the substantive judgment);
·The “asserted promises concerning the Suburb A property” (see [403] of the substantive judgment);
·The “Resulting Trust Suburb A” claim (see [404] of the substantive judgment);
·The “Express Trust Suburb A” claim (see [405]-[406] of the substantive judgment);
·The “Aunt X Promise” (see [413]-[414] of the substantive judgment);
·The “Suburb G Loan Promise” (see [415]-[425] of the substantive judgment);
·The “Suburb J property” and “Suburb J Inheritance promise” (see [426]-[433] of the substantive judgment);
·The “2006 Riley Representations” (see [434]-[440] of the substantive judgment);
·The “Suburb J Rent Promise” (see [441] of the substantive judgment); and
·The “Suburb J Equity Promise” (see [442]-[443] of the substantive judgment).
Further, the Respondent de facto wife was unsuccessful in obtaining an order for there to be an adjustment in respect to the parties’ respective interests in the F Street property.
Accordingly, even if I am in error in finding that the Respondent de facto wife was wholly unsuccessful in the proceedings, she was unsuccessful in respect to a substantial number of issues that absorbed a substantial part of the parties’ legal resources and occupied a substantial part of the proceedings.
Indemnity costs
The Full Court, in D & D (Costs)(No. 2) (2010) FLC 93-435 at [26]-[28], conducted a useful review of authorities dealing with the issue of indemnity costs in the following terms:
26. In Limousin & Limousin (Costs) [2007] FamCA 1178; [2007] 38 FamLR 478, the Court reviewed the authorities in relation to indemnity costs. Reference was there made to the judgment of the Full Court in Kohan and Kohan (1993) FLC 92-340. It was recorded at 79,614 (citations omitted) in which it was said that:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O 38 r 2, the provisions of O 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O 38 r 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2) [1983] 2 NSWLR 354]; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 358 at 368–70.
Indemnity costs orders are still an exception in this and other jurisdictions.
27. The Court in Limousin (supra) also referred to the judgment of Shephard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 118 ALR 248 upon which learned Counsel for the Wife relies in support of the present application. Shephard J said in Colgate-Palmolive (supra) (at 256):
“2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis ...
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it ...
4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course ...”
28. Reference was made to the later decision of the Full Court of Yunghanns v Yunghanns [2000] FamCA 681; (2000) FLC 93-029 in which is [sic] was said (at 87,471, par 31):
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.”
In Munday v Bowman (supra) at 84,660, Holden CJ drew from the decision of Sheppard J in Colgate-Palmolive (supra) in providing some examples of circumstances that might warrant the exercise of discretion to award indemnity costs as including:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [[1988] FCA 202; [1988] 81 ALR 397.])
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra).
(c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v Westpac Banking Corporation (unreported Federal Court, 5 March 1993)).
(e) An imprudent refusal of an offer to compromise [Medlon No 6 (supra)].
More recently, in Somers & Ettridge [2020] FamCAFC 37, Strickland J at [18] confirmed that “an imprudent refusal of an offer of compromise” might, in an appropriate case, warrant the exercise of discretion to award indemnity costs.
Insofar as the Full Court has cited, with approval, in Munday v Bowman (supra) and the decision of Sheppard J in Colgate-Palmolive (supra), where it was held that “the imprudent refusal of an offer of compromise” may be a basis for an award of costs on an indemnity basis, the principles of what are known, in other jurisdictions, as “Calderbank offers” provide some assistance in determining whether the recipient of an offer has been “imprudent” in their refusal of that offer.
A useful summary of the principals of Calderbank offers is set out in the following statement of the New South Wales Court of Appeal in Hunter v Roberts (No 2) [2019] NSWCA 235 at [6]-[7]:
6. …The making of an offer of compromise in the form of a Calderbank letter may justify a departure from the ordinary basis on which costs are awarded and assessed and, as Giles JA observed in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], the ultimate “question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule”. Subsequent authorities (including Leichhardt Municipal Council v Green [2004] NSWCA 341) have proceeded on the basis that such a departure will not be justified unless in all the circumstances it was unreasonable for the offeree not to accept the offer.
7. The relevant principles are not in issue and sufficiently summarised in the following statements of the Court in Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16] and [60]:
[14] There is no presumption that an offeree who does not accept an informal offer and does not obtain a judgment more favourable than the offer, will necessarily pay indemnity costs from the date of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Stein AJA agreeing); Jones v Bradley (No 2) [2003] NSWCA 258 at [6]-[9]; Ambulance Service of New South Wales v Worley (No 2) [2006] NSWCA 236; 67 NSWLR 719 at [18] and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) at [8].
…
[16] It has been said an assessment of the reasonableness of a party’s conduct in not accepting an offer must be made on a summary basis: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 (Elite v Salmon) at [148] (Basten JA). The factors relevant to the question whether a rejection of an offer is unreasonable include whether the offeree had an adequate opportunity to enable it to consider and deal with the offer: Elite v Salmon at [99] (McColl JA) citing Donnelly v Edelstein (1994) 49 FCR 389 at 396.
…
[60] Considerations relevant to the determination of an unreasonable refusal are identified in Miwa (at [12]), based on Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [25], and include:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree's prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.
Consideration – indemnity costs.
In my view, it was imprudent of the Respondent de facto wife to reject the 24 February 2017 offer made by the Applicant de facto husband. At paragraph 29 of his Affidavit sealed on 21 January 2020, the Applicant de facto husband contended that the effect of the offer made on 24 February 2017 was as follows:
…that the Applicant retains his unit in Suburb G and the Respondent retains her unit in such development. In addition the Applicant offered to transfer to the Respondent his 50% interest in Suburb A. The agreed value of his interest in Suburb A at the hearing is $750,000 less his liability pursuant to the two loans secured thereon which was $384,730 giving him a net interest of $365,270. This transfer was subject the Respondent taking over the Applicant's liability to the Commonwealth Bank on Suburb G and indemnifying the Applicant with respect to such debt which was $161,740 as at the date of hearing. This would result in the Respondent receiving a net benefit of $384,730 less $161,740 which equals $222,990. This offer was $204,726.40 greater than what the Respondent has been awarded in Oder 11.
Comparatively, the counsel for the Respondent de facto wife contended, at paragraph 22 of the written submissions filed on behalf of the Respondent de facto wife, that it was not unreasonable for the Respondent de facto wife to have rejected the offer for the following reasons:
The offer dated 2 February 2017 was not ‘made seriously’ due to the fact that it required [the Respondent de facto wife] to assume a further EST$600,000 of debt (where the repayments at the time were approximately $4000 per month). At the time, [the Applicant de facto husband] was aware that [the Respondent de facto wife] earned $1383 (after tax and superannuation) and had a current garnishee order which deducted $1548 per fortnight. [The Applicant de facto husband] was therefore aware or ought to have been aware that [the Respondent de facto wife] could not obtain such a loan and therefore the performance of such an offer was impossible. Further, an analysis of the terms of the offer reveal that [the Respondent de facto wife] would not have received a greater proportion of the assets should she have accepted such an offer. This offer therefore should be given no weight.
I am, however, satisfied that the characterisation of the offer set out by the Applicant de facto husband, at paragraph 29 of his Affidavit, accurately reflects its substance. That is, I am satisfied that, by accepting the offer, the Respondent de facto wife would have been better off to the extent of approximately $204,000 over and above the amount she was awarded in the proceedings. In the context of what I was able to determine to be the property pool of the parties, that amount is significant.
Further, I note in her letter dated 7 February 2017, the Respondent de facto wife advanced the proposal that the Applicant de facto husband’s interest in the Suburb A property be transferred to her and that she take on responsibility for repaying his loan in respect to that property. In those circumstances, her submissions, in these proceedings, that she lacked the capacity to obtain finance is inconsistent with the representation that she made at the time that the parties exchanged their respective offers.
Accordingly, I am satisfied that the Respondent de facto wife’s rejection of the offer made by the Applicant de facto husband in his letter dated 24 February 2017 was imprudent.
However, that, in itself, is not determinative of my decision to award costs in favour of the Applicant de facto husband on a party/party, rather than indemnity, basis. In Kohan (supra) at 79,611, the Full Court noted that “…this court has generally showed reluctance to make an order for indemnity costs against an unrepresented litigant”.
In my experience, even single-minded unrepresented litigants can benefit from the objective reflection provided by a skilled officer of the Court conducting a conciliation conference pursuant to r 12.07 of the Rules or by a skilled private mediator. In that context, by email dated 24 July 2016, the Respondent de facto wife invited the Applicant de facto husband to participate in a mediation. By reply email dated 25 July 2016, the solicitor for the Applicant de facto husband attached a response from the Applicant de facto husband in which he declined that invitation, stating that he believed a “settlement conference” held before a registrar of the Court should be “carried out asap”.
The Applicant de facto husband subsequently stated that he was unable to attend a conciliation conference that had been arranged on 4 October 2016 as a result of ill health. However, it appears that no further attempt to arrange a conference was made by either party.
Senior counsel for the Applicant de facto husband submitted that, having regard to the manner in which the Respondent de facto wife conducted this litigation, his client’s attendance at such a conciliation conference and/or mediation would have been a futility. In the substantive judgment, I expressed concern regarding what I found to be the Respondent de facto wife’s deliberate non-disclosure and the unreliability of many aspects of her evidence. Having regard to the Respondent de facto wife’s conduct and presentation in that respect, I accept that engaging in negotiations with her would have had its challenges. However, as against those observations, the offer made by the Respondent de facto wife in her letter dated 7 February 2017 was not fanciful and provided at least some basis for further discussions and the opportunity for a neutral experienced third party to provide some reflective, objective observations for the parties to consider as an alternative to what I have found to be disproportionate litigation.
Having regard to the totality of those circumstances, that is the fact that the Applicant de facto husband, himself, failed to attend a mediation or conciliation conference, I am not satisfied that this case falls into the exceptional category that justifies an order for indemnity costs.
As a result of that finding, it has not been necessary to consider an issue that arose in the proceedings regarding the content of the costs disclosure letter provided by the Applicant de facto husband’s lawyer to the Applicant de facto husband.
Conclusion
I am not satisfied that this is an appropriate case to make an order for the unsuccessful party in the litigation, the Respondent de facto wife, to pay the costs of the successful party, the Applicant de facto husband, on an indemnity basis. However, I am, nonetheless, satisfied that it is appropriate to make an order requiring the Respondent de facto wife to pay the Applicant de facto husband’s costs on a party/party basis in respect to the period on and from 24 February 2017, that date being the date of the second formal offer of settlement.
By way of summary, this is because I have found that the Respondent de facto wife was wholly unsuccessful in the litigation including the proceedings cross-vested from the Supreme Court of Victoria. If I am wrong on that, I have found that she was substantially unsuccessful in the litigation. I have also determined that the manner in which the Respondent de facto wife conducted the litigation was disproportionate to the issues in dispute and, specifically, that there was no need for her to press for findings as to what she contended were various equitable interests in the property jointly owned by herself and the Applicant de facto husband, property owned by the Applicant de facto husband, and property owned by the Applicant de facto husband with his current partner. I have also had regard to the fact that I found the Respondent de facto wife to have deliberately failed to comply with her obligation of disclosure in the proceedings. Finally, I have found that the Respondent de facto wife imprudently rejected the formal offer of settlement made by the Applicant de facto husband dated 24 February 2017.
For all these reasons, I make the orders as set out at the commencement of my reasons for judgment. In so doing, I note that I have not made the order sought by the Applicant de facto husband that such costs be charged against the F Street property, as I consider such an order to be in the nature of an order for enforcement once the amount of costs is agreed or assessed.
I certify that the preceding one hundred and twenty one (121) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice McClelland delivered on 25 May 2020.
Associate:
Date: 25 May 2020
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