Sahin & Kilgore
[2023] FedCFamC1F 774
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Sahin & Kilgore [2023] FedCFamC1F 774
File number(s): MLC 14220 of 2022 Judgment of: CARTER J Date of judgment: 8 September 2023 Catchwords: FAMILY LAW – COSTS – Where the proposed third party sought costs against the wife – where the wife sought the husband pay any costs order against the proposed third party – where the wife sought costs against the husband – costs fixed and ordered in favour of the proposed third party – where the wife is to pay those costs – no other order made as to costs. Legislation: Family Law Act 1975 (Cth) s. 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr. 12.17, 12.13
Cases cited: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225
Harris & Dewell (No 2) (2018) FLC 93-863
Kohan and Kohan (1993) FLC 92-340
Munday v Bowman (1997) FLC 92-784
Prantage & Prantage (2013) FLC 93-544
Division: Division 1 First Instance Number of paragraphs: 41 Date of last submissions: 30 August 2023 Date of hearing: In chambers Place: Melbourne Solicitor for the Applicant: Mills Oakley Solicitor for the Respondent: Farrar Gesini Dunn Solicitor for the Other: Barry Nilsson ORDERS
MLC 14220 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SAHIN
Applicant
AND: MR KILGORE
Respondent
MR B & ORS
Other
ORDER MADE BY:
CARTER J
DATE OF ORDER:
8 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.The wife pay the costs of Mr B & Ors fixed at $8,000 within 60 days.
2.The costs applications arising out of the wife’s Application in a Proceeding filed 12 May 2023 be otherwise dismissed.
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 has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUSTICE CARTER
INTRODUCTION
On 27 June 2023 I heard submissions regarding the wife’s Application in a Proceeding filed 12 May 2023 to join third parties to the substantive property proceedings between the husband and the wife in order to effect the sale of a property in Suburb C. I also heard oral arguments regarding the wife’s assertion that the husband had not complied with an order to pay her membership to a club.
In an oral judgment delivered on 28 June 2023, I dismissed the application for joinder. I also ordered that the sum of $994.95 – being the sum the husband should have paid for the wife’s 2023 club membership – be adjusted to the wife at final property settlement if not attended to before. Quite frankly, in circumstances where each of the husband and the wife were represented by senior counsel at the hearing before me it is remarkable that they were not able to resolve that extremely minor aspect of their dispute.
On 28 June 2023 I made a number of additional orders, by consent, between the husband and the wife. Those consent orders included the discharge of earlier orders; the appointment of single expert valuers; a part property payment to the wife; an order enabling the husband to refinance some mortgages; and an order dealing with the proceeds of the sale of the Suburb C property upon settlement of that sale.
The proposed third parties sought costs against the wife. The wife agreed that an order should be made in favour of the proposed third party for costs. However, there was no agreement as to the quantum of those costs. The wife also asserted that the husband should be liable to pay those costs, and not her. The wife also sought that the husband pay her costs of and incidental to the Application in a Proceeding.
This matter proceeded on the papers, with each party filing writing submissions.
The proposed third parties sought costs against the wife on a range of basis, seeking at the highest, indemnity costs fixed at $24,402.27. Alternate figures and basis were pleaded. In addition they sought further costs of $4,400 for the making of this costs application.
The wife asserted the proposed third parties’ costs should be fixed at $10,248.68 or alternatively $15,213.57, and paid by the husband. She proposed the husband pay her costs of and incidental to the application, as agreed and in default of agreement to be taxed, and that all parties pay their own costs in relation to the costs application.
The husband opposed any costs order being made against him. He sought indemnity costs against the wife only in relation to the preparation of the costs submissions which he said totalled $7,500.
SHOULD A COSTS ORDER BE MADE?
Section 117(1) of the Family Law Act 1975 (Cth) sets out the usual rule that “each party to proceedings under this Act shall bear his or her own costs” [emphasis added]. Pursuant to s 117(2), however, the Court can depart from that usual rule if there are circumstances that justify that departure, and make such order as to costs as it considers just.
When considering whether to make a costs order, if any, I must have regard to the considerations set out in s 117(2A). None of the factors are determinative of the application, or have more bearing on the outcome than any other. One factor alone can justify a costs order being made.
Each of the factors refers to the “parties to proceedings”, save for the final factor, which enables the Court to take into account “such other matters as the court considers relevant”. I note that the proposed third parties were not joined to the proceedings – and accordingly, are not parties to the substantive proceedings. However, it does not appear to be contentious that the Court may make a costs order in favour of a proposed third party if there are circumstances that justify the Court to do so. It also seems to me that the factors – whilst only expressed in the legislation as effecting the “parties to the proceedings” - can also act as a guide in relation to the matters that may be relevant to the exercise of my discretion in so far as it pertains to the non-parties.
The husband, the wife and the proposed third parties appeared before me, represented by private solicitors. The husband and the wife both retained senior counsel on 28 June 2023. The wife asserted the husband’s financial circumstances were superior to hers, and that he is better placed to meet any costs order in favour of the proposed third parties. The wife pointed to the husband’s ability to have some fees paid by his company, and his capacity to borrow from his business partner, Mr B (who is also one of the third parties sought to be joined). The husband denied he is in any financially superior position to the wife. The wife has recently received a part property payment of $94,501. The husband continues to pay her maintenance and meet some costs on her behalf.
Neither the husband, the wife nor the proposed third parties were in receipt of legal aid.
It was the wife’s case that the husband had not met his obligations as to financial disclosure in a timely manner. She also asserted he had not complied with orders – including for instance, the orders made 23 March 2023 that he was to pay the wife $100,000 as a part property settlement on or before 22 May 2023 by refinancing another property. The husband did not obtain the refinance but did not inform the wife until 2 May 2023 that he could not obtain the refinancing. The interim orders I made by consent on 28 June 2023 provided for the wife to be paid her part property entitlement from another source. It was the wife’s assertion that the husband’s poor conduct as a litigant had caused her additional expenses and distress, and made it necessary that she file the Application in a Proceeding on 12 May 2023.
The allegations as to non-compliance or poor conduct by the husband were denied by him.
There was no evidence that the wife or the proposed third parties had acted inappropriately in terms of their conduct as litigants (save that the proposed third parties and the husband asserted the wife’s application to seek joinder was an application she ought never have brought).
It was the wife’s case that the application for joinder was necessitated by the behaviour of the husband including his conduct surrounding the sale of the Suburb C property, and his asserted lack of compliance with the earlier orders of the Court for the sale of other properties (in which the proposed third parties had interests). It was her case that the husband and Mr B had prevaricated in relation to the sale of properties in Suburb D, and ultimately determined not to sell the property, notwithstanding that there was an order requiring the husband to sell his interest in the property.
The wife said she was concerned that in the absence of the proposed third party owners being joined, the sale of the Suburb C property could be similarly delayed or hindered. She also asserted the husband had not been transparent in relation to the conduct of the sale of the Suburb C property, in that he had failed to provide her with an auction authority and the vendor statement as he had been previously ordered to do.
The husband denied the wife’s concerns and argued that they did not provide any proper basis to bring her failed application for joinder.
The wife has been wholly unsuccessful in the proceedings in so far as they sought to join the third parties. She was not wholly unsuccessful in relation to the orders she sought vis a vis the husband. I determined in her favour regarding the club membership dispute. A number of consent orders were also made enabling the matter to progress. As indicated, one of the orders provided for the wife was to be paid a part property settlement that was previously ordered in March 2023 – being an order with which the husband did not comply. He said that was because circumstances arose rendering the March orders impracticable.
The wife was on notice that the application for joinder would be resisted by the husband and the proposed third parties. The proposed third parties wrote to the wife on 8 June 2023 inviting her to abandon her application and that each litigant would meet their own costs. That offer was rejected by the wife. The proposed third parties wrote to the wife on 30 June 2023, after the hearing, and offered to resolve the costs dispute on the basis that the wife pay them $20,000. The wife did not respond to that offer.
In regard to other matters, I note that the proposed third parties are unconnected personally with the husband and the wife. Mr B has a professional relationship with the husband. The nominated parties are strangers to the marriage. There was no evidence that they had acted improperly, or in any way sought to diminish the parties’ entitlements.
Notably, as set out, s 117(1) provides that “each party to proceedings” bears their own costs [emphasis added]. The proposed third parties were never parties to the proceedings – and accordingly s 117(1) does not strictly apply to them. I further note that in civil proceedings in other courts, costs usually follow the event, and I take that into consideration.
Costs order in favour of the proposed third parties is justified
I am satisfied there are circumstances that justify a costs order being made in this matter in so far as the proposed third parties are concerned.
I accept the submission made by the proposed third parties that they are “an innocent and bona fide investor” involved in commercial enterprise with the husband. They did not act deceptively or inappropriately in any way. They have not, for instance, colluded with the husband, or sought to act in any way against the interests of either of the husband or the wife.
The proposed third parties have been put to the expense and inconvenience of having to attend Court and defend the wife’s wholly unsuccessful application to be joined. They have also had to bear the expense of making submissions as to costs.
Costs order in favour of the husband and/or wife is not justified
However, I am not satisfied there are circumstances which justify a departure from the rule that the husband and the wife each meet their own costs of and incidental to the application. The wife’s application for joinder – which necessarily involved the husband – was not successful. However, other parts of the wife’s application were successful. Some aspects were not pressed, and other matters were compromised by consent.
There had been no attempt by the wife to separate the costs incurred regarding the failed joinder aspect of her application from the costs incurred in relation to the other aspects of her application.
Whilst the wife asserted that the application was effectively necessitated as a result of the husband’s poor behaviour, including issues of non-disclosure and non-compliance, those matters are very much in dispute. At this interim stage, and on the basis of written submissions, it is not possible for me to determine those disputed facts.
In the circumstances, I will make no order as to costs between the husband and the wife on any basis. That includes no order being made for the preparation of the written submissions for costs as sought by the husband.
ON WHAT BASIS SHOULD THE COSTS ORDER BE MADE IN FAVOUR OF THE PROPOSED THIRD PARTIES?
If an order for costs is to be made, it will usually be on a party/party basis. An order on an indemnity basis is a very great departure from the usual standard, and should only be imposed in exceptional circumstances (Kohan and Kohan (1993) FLC 92-340; Prantage & Prantage (2013) FLC 93-544; Harris & Dewell (No 2) (2018) FLC 93-863. In that last case, the Full Court repeated that an order for indemnity costs should be exceeding rare.
The authorities provide examples of when indemnity costs might be justified, to include:
·circumstances where an action has been commenced or continued in circumstances where the applicant ought to have known the matter had no chance of success;
·where the application was brought for some ulterior motive or out of wilful disregard to the known facts;
·where false allegations of fraud have been made;
·where misconduct has caused the court and other parties to lose time;
·where allegations have been made that ought never have been made;
·where a matter is prolonged as a result of groundless contentions; or
·where there has been an imprudent offer to compromise.
See Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR and Holden CJ in Munday v Bowman (1997) FLC 92-784, at 84,660. This is, of course, not a complete list.
I note that r 12.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) requires that:
[a] party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement or costs agreements in relation to those costs and, if so, the terms of the costs agreement or costs agreements.
Whilst the proposed third parties are not parties to the proceedings, nevertheless I regard this Rule as being equally applicable to them. I am not aware that a costs agreement between the third parties and their lawyers has been provided to my chambers.
Even had a costs agreement been provided, I am not satisfied it would be appropriate that an indemnity costs order be made in favour of the proposed third parties.
It does not appear to me that this matter can be described as an exceptional or exceeding rare case where the usual standard should be departed from. The wife has not acted on the basis of an ulterior motive; she has not made fraudulent or other allegations against the proposed third parties. Her application to join the third parties could not, in my view, be described as having no chance of success prior to the hearing on 27 June 2023 and my dismissal of that application after hearing argument.
COSTS FIXED
Rule 12.17 of the Rules allows me to fix an amount for costs. This enables me to make a costs order for a specific amount without requiring formal assessment or taxation, which would add to the delay, expense and aggravation of the proceedings.
In making an order under r 12.17(1), I may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable proceedings;
(d) whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e) the time properly spent on the proceeding, or in complying with pre-action procedures;
(f) whether expenses (paid or payable) are fair, reasonable and proportionate.
In the exercise of what has been described to be my very broad discretion, in terms of the proposed third parties, I am satisfied that the appropriate costs award is $8,000 in total. That costs award includes costs relating to the application in a proceeding and the costs submissions.
WHO IS LIABLE TO PAY THE PROPOSED THIRD PARTIES’ COSTS?
I do not accept the wife’s submissions that the husband should meet those costs. The costs have been incurred by the proposed third parties in response to an application the wife brought. The wife asserted she was effectively compelled to bring the proceedings as a result of the husband’s poor behaviour. However, whether the husband has in fact been tardy, difficult, or non-compliant remains an issue in dispute. Whether there will ultimately be any orders for costs between the husband and the wife following a final hearing - when the parties’ allegations and counter allegations can be tested - remains to be seen.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 8 September 2023
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