Sartin and Sartin and Anor (No.2)
[2016] FCCA 2687
•18 October 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SARTIN & SARTIN & ANOR (No.2) | [2016] FCCA 2687 |
| Catchwords: FAMILY LAW – Costs applications – indemnity costs applications – where offers of settlement made and rejected – indemnity costs ordered in one application and party/party in the other. |
| Legislation: Evidence Act 1995, s.131 |
| Cases cited: Allen & Allen [2007] FamCA 1018 Browne & Green [2002] FamCA 791 Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536 |
| Applicant: | MS SARTIN |
| First Respondent: | MR SARTIN |
| Second Respondent: | MS MOSS |
| File Number: | SYC 4514 of 2013 |
| Judgment of: | Judge Sexton |
| Hearing dates: | 15 July 2016 |
| Date of Last Submission: | 15 July 2016 |
| Delivered at: | Sydney |
| Delivered on: | 18 October 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Dura |
| Solicitors for the Applicant: | Freedman & Gopalan Solicitors |
| Counsel for the First Respondent: | Mr Ford |
| Solicitors for the First Respondent: | Willis & Bowring |
| Solicitors for the Second Respondent: | Jordan Antonopoulos & Co Pty Ltd |
THE COURT ORDERS THAT:
Within 7 days of settlement of the sale of the Property A property or within 7 days of the date of this Order if settlement has taken place:
(a)The Husband pay the costs of the Second Respondent in the sum of $75,000 as directed, from the funds due to the Husband in accordance with Order 5 (h) of the Orders made on 11 April 2016.
(b)The Husband pay the costs of the Wife in the sum of $20,000 as directed, from the funds due to the Husband in accordance with Order 5 (h) of the Orders made on 11 April 2016.
Upon compliance with Orders (1)(a) and (b), the balance of the funds due to the Husband in accordance with Order 5(h) of Orders made on 11 April 2016, be released to the Husband.
IT IS NOTED that publication of this judgment under the pseudonym Sartin & Sartin & Anor (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 4514 of 2013
| MS SARTIN |
Applicant
And
| MR SARTIN |
First Respondent
And
| MS MOSS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The Wife and the Wife’s mother (the Second Respondent in the substantive proceedings) seek costs against the Husband on an indemnity basis, in relation to property proceedings commenced by the Wife in August 2013, heard in August 2015 and finalised by orders made on 11 April 2016.
In these proceedings, the Husband was represented by Mr Ford of counsel, the Wife by Mr Dura of counsel and the Second Respondent by her solicitor, Mr Jordan Antonopoulos.
The Second Respondent relies on her solicitor’s affidavit sworn 9 May 2016 to which she annexes her solicitors’ costs agreement, and tax invoices from her solicitor. She relies on the affidavit of the Wife sworn 9 May 2016 with annexures, the Judgment and Orders, counsel’s tax invoices dated 17 October 2014 and 6 August 2015[1], and her Conciliation Conference document. Her solicitor, Mr Jordan Antonopoulos, provided written submissions. The primary basis of the Second Respondent’s application is that the Husband unreasonably denied the whole of her entitlement from before the proceedings were commenced by the Wife, until the third day of final hearing when the Husband conceded her full claim. The Second Respondent further alleges that the Husband’s conduct during the proceedings resulted in the proceedings being prolonged and the Second Respondent incurring significant costs for which she should be compensated. In particular, the Husband failed to file his responding documents in accordance with the Rules, failed to provide full and frank disclosure in a timely manner, failed to comply with Court orders, and unreasonably rejected offers of settlement during the course of the litigation. The Second Respondent submits that the Court would not only make a costs order in her favour, but that such an order would be made on an indemnity basis.
[1] Exhibit 1
Mr Antonopoulos for the Second Respondent highlights paragraphs 2 and 3 of the Court’s Reasons for Judgment in the substantive case which summarise the Husband’s position in relation to the Second Respondent’s claim[2]:
2. Until the Husband was cross examined on the third day of hearing, the central issue in dispute was whether the Second Respondent, had a claim in equity against the spouse parties in the sum of $648,982.58 [$207,963.58 + $441,019]. The Applicant Wife has always agreed with the Second Respondent’s claim, but the Respondent Husband has always disputed the claim. The Husband was seeking relief providing for no monies to be paid to the Second Respondent. Much of the hearing was spent on the Second Respondent’s claim.
3. However, the Husband’s position changed on the third and final day of hearing. In the Husband’s Minute of Order tendered on that day, the Husband acknowledged that the Second Respondent was owed $207,963, though sought an order providing for the funds to be paid to the Second Respondent from the Wife’s share of the property settlement. In cross examination on the third day of the hearing, the Husband conceded the $207,963 should be repaid to the Second Respondent by both parties, and he also conceded that the Second Respondent should be repaid the other amount claimed by her in the sum of $441,019. This meant the Second Respondent’s claim was resolved.
[2] At paragraphs 2 and 3 of Sartin & Sartin & Anor [2016] FCCA 800
It is submitted for the Second Respondent that she could have been relieved of the litigation altogether had the Husband acknowledged her entitlement from the outset. And once a party to the proceedings, had the Husband accepted written offers of settlement from the Second Respondent, he would have been in a much better financial position than he is as a result of the Court’s final orders.
The Wife relies on her Affidavit of 9 May 2016, annexures to her affidavit and counsel’s submissions. Counsel submits that the central issue in the case was the liability of the parties to the Second Respondent. The Wife’s claim is based on the Husband’s conduct in the litigation, in particular, his denial of the Second Respondent’s entitlement until the final day of hearing. Counsel for the Wife submits that the Husband put the parties to the expense of a trial to deal, in the main, with the Second Respondent’s claim, despite being aware of her entitlement before the proceedings started, and having all the relevant documents available to him by no later than February 2014. Counsel points out that nothing new was provided after that date by any of the parties, to change the position, and the Husband was always legally represented. The Wife also deposes to the Husband failing to file his responding documents as ordered, failing to provide full and frank disclosure of his financial position, failing to respond to requests for clarification/information of financial documents, and rejecting reasonable offers of settlement. The Wife submits that she is entitled to indemnity costs from 8 October 2014.
Legal principles
In accordance with s. 117(1) of the Family Law Act 1975 the usual rule in family law proceedings is that each party pay his/her own costs. However, s. 117(2) provides that the court may order costs if it is of the opinion that there are circumstances that justify it in doing so, subject to s.117(2A). The Court must find justifying circumstances as an “essential preliminary to the making of an order” for costs.[3]
[3] Penfold v Penfold (1980) 144 CLR 311 at 315 and 316
In relation to the authorities and principles to be applied to an order for indemnity costs, the Full Court in Kohan & Kohan (1993) FLC 92-340 said that although the Court has a discretion to order costs on an indemnity basis, such an order is an exception in family law proceedings, and is “a very great departure from the normal standard.” Holden CJ in Munday v. Bowman (1997) FLC 92-784 at 84660, drew from the decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536, examples of circumstances warranting the exercise of the discretion to award costs on an indemnity basis:
(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…
(d) An imprudent refusal of an offer of compromise
Justice Boland in Allen & Allen[4] said in relation to indemnity costs:
The power to make an indemnity costs order in an appropriate case is recognised (see Yunghanns & Ors v Yunghanns & Ors (2000) FLC 93-029 at paragraph 31). The principles which apply to the making of an indemnity costs order are not limited to cases where fraud or collateral purpose is established against one party. What is required is that some “particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis”: per Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233; (1993) 118 ALR 248 at 257. Generally the departure from the ordinary rules relating to costs will require exceptional circumstances (see Munday and Bowman (1997-1998) 22 Fam LR 321).
[4] [2007] FamCA 1018 at paragraph 126
In Latoudis v Casey (1990) 170 CLR 534, the High Court stated:
…in exercising its discretion to award or refuse costs, the court should look at the matter primarily from the perspective of the defendant…. Costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings.
The court must have regard to all the matters referred to in s.117(2A) subsections (a) to (g) when determining a claim for costs. The Court has a broad discretion to order costs and an order can be made on the basis of one or more of the factors in (a) to (g).
The Rule 21.02(2) of the Federal Circuit Court Rules 2001 provides that in making an order for costs the Court may set the amount of the costs; or set the method by which the costs are to be calculated; or refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules.
Orders sought by Wife
By her Application in a Case filed on 10 May 2016, the Wife seeks an order that the First Respondent (the Husband) pay the Wife’s costs in the sum of $94,080.65, made up as follows:
a)$18,080.27 between 1 February 2013 and 7 October 2014; and
b)$76,000.38 between 8 October 2014 and 14 August 2016.
In the alternative, the Wife seeks an order that the Husband pay the Wife’s legal costs in an amount as agreed between the parties or as assessed, and the sum of $94,080.65 from the Husband’s entitlement to the proceeds of sale of the former matrimonial home pursuant to Order 5(h) of Orders made 11 April 2016 [Final Orders] be placed in the Trust Account of the Wife’s solicitors until the Husband’s liability for the Wife’s costs is assessed and paid, with the balance thereafter, subject to any other Order, being released to the Husband. Order 5(h) of the Final Orders provides that the Husband will receive the balance of the net proceeds of sale of the Property A property, after all other distributions, itemised in Order 5, have been made. Order 11 provides that Order 5(h) be stayed pending finalisation of any costs applications against the Husband and that funds due to the Husband be held in the Second Respondent solicitors’ Trust Account.
Orders sought by Second Respondent
By her Application in a Case filed 10 May 2016, the Second Respondent seeks costs from the Husband on an indemnity basis. The Second Respondent quantifies her indemnity costs as $127,809 including disbursements. In the alternative the Second Respondent seeks her costs on a party/party basis calculated in accordance with either the Family Law Rules 2004 or the Federal Circuit Court Rules 2001. The Second Respondent also seeks her costs of the costs application.
Orders sought by Husband
By his Response filed 6 June 2016, the Husband seeks an order dismissing the Wife’s application and an order that he pay the Second Respondent’s costs on a party/party basis calculated in accordance with either the Family Law Rules 2004 or the Federal Circuit Court Rules 2001. By further Response filed 6 June 2016, the Husband seeks an order that he pay the Second Respondent’s costs in a fixed sum of $40,000.
Litigation history
On 8 August 2013, the Wife commenced proceedings for property adjustment. The Wife sought orders providing (inter alia) for the Husband to discharge the mortgage on the former matrimonial home at Property A to (omitted) Mortgage Fund in the amount of $145,000 and for the property to be transferred by the Husband and the Wife to the joint names of the Wife and the Wife’s mother (later joined as the Second Respondent).
On 4 September 2013, the Wife filed an Amended Application joining her mother as a Second Respondent to the proceedings, and seeking amended orders, inter alia, that the Husband discharge the (omitted) mortgage in the sum of $145,000 and the Husband and the Wife transfer the Property A property from their joint names to the sole name of the Wife.
On 2 October 2013, the Second Respondent filed a Response seeking that the Husband and the Wife discharge the (omitted) mortgage, and that the Husband and the Wife transfer the Property A property from their joint names to the joint names of the Wife and the Second Respondent as tenants in common in equal shares.
On the first return date, 11 October 2013, the Court directed the Husband to file and serve his Response by 22 November 2013, and it was noted the parties would endeavour to resolve valuation issues by the adjourned date, 31 January 2014. The Husband failed to file his Response in accordance with those orders.
On 15 October 2013, the Wife’s solicitors sought financial disclosure from the Husband’s solicitors. There was no response.
On 16 December 2013, the Wife’s solicitors advised chambers about the Husband’s failure to file his Response and to comply with his obligations to provide financial disclosure.
On 19 December 2013, the Husband provided some disclosure documents.
On 15 January 2014, the Wife’s solicitors sought further disclosure and provided a draft balance sheet. There was no reply to those letters.
On 28 January 2014, the Husband filed his Response seeking orders (inter alia) that the Second Respondent’s claim be dismissed, that the Property A property be sold, and from the proceeds of sale, the mortgage be discharged and the net sale proceeds divided equally between the Husband and the Wife.
On 31 January 2014, the Court made a $300 costs order against the Husband and made orders for further disclosure.
On 14 February 2014, the Wife complied with those orders. The Husband did not. The Wife’s solicitors provided the Husband’s solicitors with documents evidencing the Wife’s parents’ payments to the parties in relation to the Property G and Property A properties, and the Deed entered into between the Wife and her parents on 20 February 1991.[5]
[5] Exhibit 2 at Tab 1
While the Husband provided further disclosure on 10 March 2014, he did not fully comply with orders for disclosure.
On 21 March 2014, the Court was provided with a Balance Sheet[6] which listed joint liabilities to the Second Respondent of $648,982 and $17,306 (mortgage arrears paid by the Second Respondent for the parties).[7]
[6] Exhibit 2 at Tab 2
[7] Exhibit 2 at Tab 2
On 26 May 2014, the matter was listed before a Registrar for a Conciliation Conference. The Wife was still seeking full disclosure from the Husband and the matter did not settle. Subpoenas issued thereafter.
On 19 June 2014 the Husband provided further disclosure.
On 24 June 2014, the Court referred the parties to a further Conciliation Conference in September 2014 and listed the matter for hearing in November 2014.
In August 2014, the Wife sought clarification in relation to documents produced on subpoena from the Husband, who did not respond.
On 27 August 2014, the Wife served a Notice to Admit Facts on the Husband and the Second Respondent.[8]
[8] Exhibit 2 at Tab 5
On 28 August 2014, the Wife received further disclosure documents from the Husband.
In September 2014, the parties attended another Conciliation Conference but the matter did not settle.
On 9 September 2014, the Husband served a Notice Disputing Facts[9] which, inter alia, disputed the following facts:
a)That the Wife had entered into a Deed with her parents in 1991, whereby the Wife held the property at Property G on trust for her parents.
b)That the Husband had wanted the loan to (omitted) to start up his own business, and that he had represented to the Wife in July 2012 that he would accept full responsibility for the loan.
c)That on 7 April 1992, the Wife’s parents lent the Wife $260,000 for the purchase of property at Property A.
d)That the parties were indebted to the Second Respondent in the amounts of $441,000 and $207,963 and $260,000 in relation to the properties at Property G and Property A, as well as $13,174.70, being repayments the Second Respondent had contributed to the (omitted) Mortgage, a total of $922,137.70.
[9] Exhibit 2 at Tab 6
On 9 September 2014, the Wife’s solicitors requested a reply to their earlier request for further disclosure.
On 9 September 2014, the Second Respondent served her reply to the Wife’s Notice to Admit Facts.[10]
[10] Exhibit 2 at Tab 7
On 8 or 9 September 2014, the Second Respondent offered to receive 45% of the sale proceeds of Property A (but not less than $475,000). The Wife accepted. The Husband rejected the offer. The Husband offered $260,000 to the Second Respondent who rejected the offer.
On 26 September 2014, the Husband served an “open offer of settlement”[11] providing for the Wife to pay the Husband $415,784 within 3 months or otherwise the Property A property be sold and sale proceeds be divided 45% to the Husband and 55% to the Wife after discharge of the (omitted) mortgage and payment of various of the parties’ debts (the asset pool relied on did not include any liabilities to the Second Respondent). The Offer included a provision that the Wife indemnify the Husband against any claim by the Second Respondent and made no provision for the Second Respondent. The offer was rejected.
[11] Exhibit 2 at Tab 8
On 7 October 2014, the Wife made a ‘Calderbank’ offer, open for a period of 28 days[12], providing for the Property A property to be sold, and after sale costs, 45% of the net proceeds be paid to the Second Respondent, being not less than $475,000, the mortgage then be discharged and the balance paid 53% to the Wife and the balance to the Husband. The offer was rejected by the Husband.
[12] Exhibit 2 at Tab 9
On 17 October 2014, the Second Respondent filed an Amended Response seeking (inter alia) a declaration that she has equity in the Property A property in the amount of $648,982.58, that the property be sold and the Second Respondent paid $664,294.73 (including $15,212.15 being the payments she had made towards the (omitted) mortgage), and the balance be divided between the Husband and the Wife as ordered by the Court.
On 27 October 2014, the parties were served with an Offer by the Second Respondent[13] providing that the Property A property be sold forthwith, the mortgage discharged, the Second Respondent paid $500,000 and the balance divided between the Husband and the Wife as ordered by the Court. On 28 October 2014, the Wife accepted this Offer. [14] On 29 October 2014, the Husband rejected the offer.
[13] Exhibit 2 at Tab 10
[14] Exhibit 2 at Tab 11
On 3 November 2014, the matter was adjourned to 3 days in June 2015 (in January 2015 the dates were altered to August 2015).
On 18 November 2014, the Wife’s counsel filed and served a Points of Claim on behalf of the Second Respondent, all of which were admitted by the Wife.
On 19 November 2014, the Wife sent a further Calderbank offer to the Husband[15], open for 28 days, providing for the Property A property to be sold forthwith, the mortgage discharged, the Second Respondent paid $500,000 and the balance divided between the Husband 45% and the Wife 55%. The Husband rejected the offer.
[15] Exhibit 2 at Tab 13
I note that Mr Antonopoulos refers in his Case Outline to an offer made by the Second Respondent on 3 August 2015, which was rejected by the Husband. However, given it was not referred to in his or the Second Respondent’s affidavit, I have no regard to it.
On 7 August 2015, the Second Respondent offered in writing to accept $75,000 by way of costs from the Husband (although costs exceeded $100,000). The Husband rejected the offer.
Final orders made by the Court on 11 April 2016 provided for the Property A property to be sold forthwith, and for the proceeds to be distributed in the following order and priority: sale costs, $648,982.58 to the Second Respondent, $120,000 to the mortgagee, 70% of the balance to the Wife, $12,605.60 to the Wife, $25,000 or the amount required to discharge the mortgage, and finally the balance to the Husband.
On 9 June 2016, Mr Antonopoulos states in his Case Outline that he advised the Husband that the Second Respondent’s costs totalled $127,809.00 but offered to accept $85,000 in costs, an offer rejected by the Husband. However, there is no evidence of this offer in either the Second Respondent’s or her solicitor’s affidavit. I therefore have no regard to it.
(a)The financial circumstances of each party
Wife’s financial position. At the date of hearing, the Wife had not been in paid employment since October 2013 and was relying on a Newstart Allowance of $259 a week. Her mother was paying the interest only mortgage instalments of $1,100 a month on Property A and contributing an estimated $50 a week towards household expenses. The Wife owed in excess of $55,000 to her mother, and owed a debt to Mastercard. She had minimal assets beyond the Property A home. Since early 2016, she has been in[16] permanent part time employment. She now earns approximately $800 a week after tax. Upon the sale of the Property A home, the Wife should receive in excess of $400,000, but will still owe substantial monies to the Second Respondent.
[16] Affidavit of Wife sworn on 9 May 2016
Second Respondent’s financial position. The Second Respondent is aged 86 years and relies for income on the aged pension. She will receive the sum of $648,982.58 when the Property A property is sold. During the course of the litigation, she relied on savings and her aged pension for support. She was living with her daughter and grandsons. She has incurred legal costs of over $127,000 as a result of the property proceedings.
Husband’s financial position. As at October 2014, the Husband deposed to earning a gross full time salary of $115,000 as a (occupation omitted) in (country omitted), but given his substantial credit card debts and his responsibilities for his partner and their young child, deposed to his expenses exceeding his income at that time. He was living with his partner and child in rented accommodation. While I found his evidence inadequate as to his financial position, I was satisfied he was under financial strain. Nevertheless, I found the Husband had the greater opportunity to generate income and therefore acquire assets, to borrow to invest and to contribute to superannuation. In a Financial Statement sworn on 3 June 2016, he deposes to now working part-time and to a gross income of $72,020 per annum, including a car allowance. He deposes to owning a car and joint savings with his partner of an estimated $27,000. He estimates his lump sum entitlement from the sale proceeds of the Property A home under the Final property orders at $156,600, less $25,000 for his share of the mortgage loan to be paid from his entitlement. He has superannuation entitlements of $28,649. He deposes to substantial credit card liabilities including legal fees. He has had an interest in his deceased father’s estate since early 2016 but gives no evidence of the value of his inheritance. The Husband does not explain why he has reduced his working hours and income from the time of hearing, nor why he could not give an estimate of the quantum of his inheritance. Mr Ford for the Husband said an estimated figure may be provided to the parties and the Court following the costs hearing, but that has not occurred. The Husband deposes to being at risk of bankruptcy.
It is not necessary for the court to examine in close detail each party’s financial position in a costs hearing. It is enough to consider each party’s position in broad terms[17]. On the basis of my findings at the hearing of the property proceedings, and on the basis of the further financial information available to me in these proceedings, I am not satisfied the Wife or the Second Respondent have resources beyond those to which they are entitled to pursuant to the Final Orders. I am satisfied the Husband earns a higher income than the Wife and the Second Respondent, and will have the benefit of an inheritance he has not quantified. The Second Respondent does not have the opportunity for gainful employment, as do the Husband and the Wife. These are matters to which I have regard.
(b)Whether a party is in receipt of legal aid
[17] Browne & Green [2002] FamCA 791 at paragraph 26
The Court accepts that none of the parties are in receipt of legal aid.
(c)The conduct of the parties in relation to the proceedings[18]
[18] This factor includes, without limitation on its generality, 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.
The Wife entered into a Deed of Trust with her parents in February 1991 declaring that the Wife would hold the property at Property G (a property purchased by the Wife with the financial assistance of her parents before the parties’ commenced cohabitation) beneficially for her parents. While the Husband did not refer to the Deed in his affidavits, he said he had been aware of its existence. While he denied reading a copy of the Deed until the property proceedings started, I was satisfied the Husband was aware of the terms of the Deed from 1991. The Wife encumbered the Property G property with the knowledge of the Husband in breach of the terms of the Deed. When the Wife later sold the Property G property, I found it had been encumbered in the sum of $441,000 by the parties without the knowledge or consent of the Second Respondent. I found the balance of the sale proceeds in the sum of $207,963.58 was retained by the Wife and spent by the parties. I was satisfied that the Second Respondent received no benefit from the sale of the Property G property, despite the terms of the Trust Deed. At final hearing on the third day, the Husband acknowledged the Second Respondent was entitled to the total of these sums. Until then, he had never acknowledged the Second Respondent’s entitlement. As noted, this was the significant issue in dispute throughout the litigation and the basis of the costs applications.
On 28 January 2014, the Husband filed his Response, well out of time. He sought to have the Second Respondent’s claim dismissed.
On 14 February 2014, documents were provided to the Husband which addressed the basis for the Second Respondent’s claim.[19]
[19] Exhibit 2 at Tab 1
In March 2014, the Husband disputed the Second Respondent’s claim entitlement in the Balance Sheet.[20]
[20] Exhibit 2 at Tab 2
In May 2014, the Wife asserts in her Conciliation Conference document[21] that the total to be repaid to the Second Respondent is $648,982, (the amount she was ultimately awarded, and the amount ultimately conceded by the Husband). The Husband asserts that the Second Respondent’s claim be dismissed, that the Deed of Trust did not ground her claim as it was entered into for “alternative purposes” (not articulated).[22]
[21] Exhibit 2 at Tab 3
[22] Annexure D of Husband’s affidavit sworn on 3 June 2016
On 27 August 2014, the Wife served a Notice to Admit Facts on the Husband which included the fact that on 20 February 1991 the Wife entered into a Deed with her parents whereby she agreed to hold the Property G property on trust for her parents. On 9 September 2014, the Husband disputed that fact. He also disputed the fact that the parties were indebted to the Second Respondent.[23]
[23] Exhibit 2 at Tab 6
On 26 September 2014, the Husband made an Offer of Settlement to the Wife and Second Respondent.[24] That offer denied the Second Respondent’s claim in its entirety. I find no evidence to support the Husband’s contention that the offer accommodated a payment to the Second Respondent.
[24] Exhibit 2 at Tab 8
On 31 July 2015, in his Orders sought at hearing,[25] the Husband sought to dismiss the Second Respondent’s claim in full.
[25] At Annexure I of Husband’s affidavit sworn on 3 June 2016
On 3 August 2015, the first day of hearing, the Husband conceded that the Second Respondent was owed $207,963 but sought an order that the Wife be solely responsible for its repayment. On 5 August 2015, the third day of the hearing, the Husband acknowledged that the sum should be repaid by both parties. It was not until the Husband was cross-examined later that day that he acknowledged that the Second Respondent was entitled to the total sum she was seeking. It is noteworthy that the Husband deposes, in these proceedings, to remaining unaware of the existence of any loan made by the Second Respondent. He says, “notwithstanding my confusion and concessions…it remains an issue in dispute in my own mind.” [26] His apparent confusion about the basis of the Second Respondent’s entitlement is difficult to reconcile with his concessions made at the hearing, and the factual findings made in the Reasons for Judgment.
[26] At paragraph 31 of Husband’s affidavit sworn on 3 June 2016
I agree with Mr Dura for the Wife that the Court was then left to determine how the mortgage loan was to be apportioned between the parties and the percentage entitlement of the balance of the sale and proceeds of the Property A property. While counsel acknowledges that the Wife was successful on one issue, and the Husband on the other, Counsel submits those issues could have been contained to half a day, and would not have involved the Second Respondent.
While the Husband contends that until trial the Wife alleged a further $260,000 was owed to the Second Respondent, this was not being claimed by the Second Respondent.
I agree with Mr Antonopoulos that it was always the Husband’s position that the Second Respondent should receive nothing, and that if any amount was owed to her, the Wife should be solely responsible for its repayment. It was always the Husband’s position that the Wife was not bound by the Deed of 1991 and therefore the Second Respondent had no interest in the Property G property. This was one of the fundamental reasons the Wife had to start the proceedings. As already noted, the Court did not accept the Husband’s claim that he had no knowledge of the terms of the Deed from 1991, nor that he had no knowledge of sale of Property G property in 2009. I found the Husband had full knowledge of the Deed and of the sale, and in fact had asked the Wife to speak to the Second Respondent about selling the Property G property so that the parties could discharge their debts. I agree with Mr Antonopoulos’ submission that the Husband was involved in an exercise of futility, persisting with an untenable position.
As outlined earlier, I find the Husband did not file his responding documents, firstly as required by the Rules and secondly as ordered by the Court. He did not file his Response until almost 6 months after the proceedings were commenced. The Husband did not comply with orders of 31 January 2014 to provide disclosure documents to enable a Balance Sheet to be settled. He was several weeks late.
I find the matter could not proceed to hearing in November 2014 as listed, because the Husband’s counsel said it could not be completed within the time allocated and that this was because the Husband continued to assert that the Second Respondent was not entitled to any funds from the Property A property. In addition, on the day the proceedings were due to start, 3 November 2014, the Husband’s solicitor served for the first time 3 lever arch files of documents advising that the Husband would seek to tender them in the proceedings.
In June 2016, the Husband deposes to having made efforts early in the litigation to fully disclose his financial material, and to file material as ordered, but was hindered by his solicitors, and by his Wife withholding relevant documents held at the former matrimonial home. I am not satisfied these matters excuse the Husband’s failure to comply with his obligations.
In light of the matters outlined here, I find that the Husband “failed significantly to cooperate in a manner calculated to bring the proceedings to an early conclusion at a minimum of cost.”[27]
(d) Whether the proceedings were necessitated by a failure of a party to comply with a previous court order
[27] In the Marriage of Briese (1986) FLC 91-713 per Smither J
This factor does not apply.
(e)Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The Husband was wholly unsuccessful in the proceedings relating to the Second Respondent’s claim. He was wholly unsuccessful in his attempt to establish that the 1991 Trust deed did not bind the Wife, and that the Second Respondent therefore held no interest in the Property G property.
In her Amended Response filed in October 2014, the Second Respondent sought a declaration that she have an equity in the Property A property in the sums of $441,019 and $207,963.58 which is the precise payment she received in the final Orders of April 2016. As noted in my Reasons, much of the hearing was devoted to this issue.
The Husband was not wholly unsuccessful in relation to the Wife’s claim, though I agree with counsel for the Wife that even though the Wife was not wholly successful in her claim relating to the mortgage debt, the dispute on that issue would have required less hearing time.
(f) Whether a party has made an offer in writing to the other party to settle the proceedings and the terms of any such offer
The Wife relies on her Offer of Settlement served on the Husband on 7 October 2014,[28]which included sale of the Property A home, payment of 45% of the net proceeds (before payment of the mortgage debt) (but at least $475,000) to the Second Respondent, payment of the mortgage, payment of the balance as to 53% to the Wife and the balance to the Husband. I agree with Mr Dura that on the basis of the balance sheet at that time, the Husband would have been considerably better off had he accepted that offer, than he is under the orders made after the final hearing. I am satisfied that this offer is relevant to the issue of costs. While Mr Ford for the Husband submits the offer amounted to 2% of the sale proceeds to the Husband, it is clear he misunderstood the offer. Under the offer, the Husband would have received 47% of [$1,375,000 less sale costs less (45% of the then balance to the Second Respondent) less ($145,000) ((omitted) loan)]. The Husband’s counsel also submits the offer was open for 4 days, when it was open for acceptance for 28 days. I accept Counsel for the Husband’s submission that the offer does not foreshadow an application for indemnity costs, a factor to be considered when deciding whether the rejection of an offer is unreasonable, but do not accept that this defeats the validity of the offer.[29]
[28] Exhibit 2 at Tab 9
[29] See decision of the NSW Court of Appeal in Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 that referred to the Court of Appeal decision in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298
On 19 November 2014, the Wife made another offer of settlement to expire after 28 days. The offer provided for sale of the Property A property, payment of sales costs, then the mortgage, then $500,000 to the Second Respondent, then 55% of the balance to the Wife and 45% to the Husband. The Husband rejected the offer, but I am satisfied would have been significantly better off had he accepted it.
While I accept Mr Ford’s submission that the Wife was seeking the repayment of an additional $260,000 to the Second Respondent by the parties, and did not abandon this claim until the hearing was in progress, the Wife did not include this part of her claim in her Offers of Settlement and it was not part of the Second Respondent’s claim.
On 26 May 2014, at the first Conciliation Conference, the Second Respondent made an offer to settle her claim in the sum of $500,000 being paid to her from the sale proceeds of Property A with each party to pay their own costs. The offer was accepted by the Wife and rejected by the Husband[30]. The Husband would have been in a significantly superior financial position had he accepted that offer.
[30] At paragraph 13 of Second Respondent’s solicitor’s affidavit sworn on 9 May 2016
On 8 September 2014, at the second Conciliation Conference, the Second Respondent repeated the offer made on 26 May 2014[31]. Again it was accepted by the Wife and rejected by the Husband. The Second Respondent then made a further offer that she would receive 45% of the nett sale proceeds (less costs) provided the figure was not less than $475,000, with each party paying own costs. The offer was accepted by the Wife, and rejected by the Husband.[32]
[31] At paragraph 15 of Second Respondent’s solicitor’s affidavit sworn on 9 May 2016
[32] Offer at a Conciliation Conference can be considered in determining liability for costs – section 131(2)(h) Evidence Act 1995
The Second Respondent filed her Amended Response on 17 October 2014 seeking payment to her of $649,082.58 plus $15,212.15 and served an open offer of settlement on 27 October 2014. The Second Respondent offered to settle the matter on the basis that the Property A property be sold, the mortgage fully discharged, the Second Respondent paid $500,000 and the balance divided as ordered by the Court. This offer was open for 4 days.
On 7 August 2015, after the hearing, the Second Respondent offered in writing to accept $75,000 by way of costs from the Husband (although costs exceeded $100,000). The Husband rejected the offer.
The Husband claims to having first been aware of the Second Respondent’s claim when her Amended Response was filed on 17 October 2014. Her Amended Response refers to her claim in equity. However, Mr Ford for the Husband submits that the Husband was only aware that the Second Respondent’s claim was in equity (rather than in contract) on 11 November 2014 when Points of Claim were served. Mr Ford argues that the Husband could not have been expected to respond to the offer before he understood the legal basis of the claim. Counsel submits that by 11 November 2014, the offer had expired and he was never served with a further Offer. I find Counsel’s submissions unhelpful and confusing and I reject them. The Husband was aware of the terms of the Deed; he was aware of the sale of Property G and the sums he and the Wife had borrowed against that property in breach of the terms of the Deed. He was aware the parties had never accounted to the Second Respondent for the sums borrowed and secured on the Property G property or the funds received on its sale. And ultimately he acknowledged her claim for $648,982 in cross examination. The narrative is clearly set out in the Conference document of the Second Respondent dated May 2014[33]. While I accept the offer was only left open for 4 days, I do not accept that the Husband could not have accepted that offer if he had chosen to do so. And while the Second Respondent did not serve a further Offer after 11 November 2014, the Wife served another Offer on 19 November 2014. It is clear the Husband would have been significantly better off than he was after the hearing, had he accepted any one of those offers.
[33] Exhibit 2 at Tab 4
I am satisfied the Husband’s rejection of each of these Offers was an “imprudent refusal of offer of compromise” as referred to in the decision of Colgate.[34] I do not accept the Husband’s Counsel’s submission that the Husband was never in a position to assess any offer of settlement from the Second Respondent because each had “fatal flaws”.
[34] Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536
The Husband deposes to his efforts to resolve the dispute well before proceedings were instituted. On 30 June 2012, the Husband emailed the Wife offering to settle on the basis of (he says) 65/35 in favour of the Wife on the sale proceeds of the home[35]. However, his offer does not address the mortgage loan on the home, nor any accounting to the Second Respondent. The offer was open for 4 days. It contained warnings to the Wife as to what would follow if the offer was not accepted. On 15 January 2013, the Husband emailed the Wife offering her 60%, without reference to any of the figures on which the offer is based. I find these ‘offers’ to the Wife irrelevant to the issues before me.
[35] Annexure A of Husband’s affidavit sworn on 3 June 2016
While I accept the Husband’s Counsel’s submission that the Husband made offers of compromise during the litigation, none of them, if accepted, would have achieved a better result for the Second Respondent or the Wife. I find it noteworthy that the offer made by the Husband after the 2 conciliation conferences made no provision at all for the Second Respondent. I do not accept the Husband’s contention [in his Affidavit] that the offer he made on 26 September 2014[36] for the Wife to pay the Husband $415,784 within 3 months (with default provisions) provided in any way for the Second Respondent.
[36] Exhibit 2 at Tab 8
In Browne & Greene [37], the Full Court (Kay, Coleman and Warnick JJ) made it clear that:
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 ought normally to be given. It is clearly a circumstance that would justify the making of an order for costs.
[37] [2002] FamCA 791 at paragraph 57
I agree with Mr Antonopoulos for the Second Respondent that the offers made by the Second Respondent should be given significant weight. I find that the Husband made no genuine effort to resolve the Second Respondent’s claim. He was aware that the Second Respondent was meeting the loan repayments on the Property A home to avoid foreclosure by the bank. I agree with him that the Husband’s position shows a lack of bona fides.
I find that the Offers of Settlement by the Wife and the Second Respondent give support to an order for costs in relation to both parties.
(g) Any other matter the court considers relevant
Mr Antonopoulos submits for the Second Respondent that without an order for indemnity costs in her favour, the Second Respondent will lose approximately 20% of her entitlement (as awarded) and will suffer financial hardship given the quantum of legal costs incurred.
Mr Dura submits for the Wife that without an order for indemnity costs from 8 October 2014 in her favour, the Wife will suffer prejudice as she has a modest income and her only asset of significance is her entitlement to a share of the sale proceeds of the Property A property.
Mr Ford submits for the Husband that costs orders as sought by the parties might result in the Husband’s bankruptcy, which is not the purpose of such orders.
Determination
As a result of my findings under the above factors, I am satisfied there should be an order for costs against the Husband in relation to both the Second Respondent and the Wife. The questions remaining are quantum and whether costs are warranted on an indemnity basis for either claimant.
The Second Respondent seeks her costs from the Husband on an indemnity basis in the amount of $127,809 as well as costs of her costs application. Although his client seeks party/party costs in the alternative, Mr Antonopoulos does not provide the Court with a schedule of costs calculated in accordance with Schedule 1 of the Rules. The Husband acknowledges that an order for costs against him should be made but seeks to limit the quantum to $40,000. Mr Ford for the Husband submits that if the Court were to order indemnity costs in the sum sought, it would be grossly unfair to the Husband because the sum sought is exorbitant, is not itemised, and includes Counsel’s cancellation fees which should not fairly be included.
The Husband’s Counsel submits that neither the Wife nor the Second Respondent can justify a claim for indemnity costs. Mr Ford submits that the Second Respondent is entitled to her costs on a party/party basis from November 2014, in the sum of approximately $40,000.
I have regard to the Full Court’s decision in Kohan[38] in considering whether to exercise my discretion to order costs to either party on an indemnity basis. The Full Court stresses that such an order is a very great departure from the normal standard. The Court must know the terms of the agreement, the extent to which it exceeds the guidelines set by the costs Schedule, and what its likely impact will be on each party’s financial position. The Full Court says:
This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s.117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). 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…
…insofar as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis.
[38] Kohan & Kohan (1993) FLC 92-340
In relation to the Second Respondent’s application, I am satisfied exceptional circumstances exist to justify an indemnity costs order in her favour. I am satisfied the circumstances are “extreme” in the sense contemplated by the Full Court in the recent decision of Madin & Pallis.[39] I agree with Mr Antonopoulos that the Husband challenged the Deed from the outset without plausible explanation, and offered no relief to the Second Respondent until making concessions on the third day of the hearing, two years after the litigation commenced. The Husband was wholly unsuccessful in relation to the Second Respondent’s claim; the Husband rejected reasonable offers of settlement which would have resulted in a lesser sum being paid to the Second Respondent and no order for costs; the Husband’s conduct resulted in significant costs for the Second Respondent; the Husband admits liability for a costs order and was on notice an indemnity costs order would be sought. I find the Husband was aware of the details of the Second Respondent’s claim in the substantive proceedings by no later than February 2014, if not earlier. There is no issue of disclosure on the part of the Second Respondent.
[39] [2016] FamCAFC 25
I have decided the Second Respondent’s costs will be paid from the day after her offer made at the first conciliation conference, being 27 May 2014, 3 months after the Wife’s solicitors provided the Husband’s solicitors with documents to verify the Second Respondent’s claim. The Second Respondent entered into a Costs Agreement with Mr Antonopoulos dated 22 July 2013.[40] The first invoice for the relevant period from Mr Antonopoulos covers the period 11 February 2014 until 9 September 2014 and is in the amount of $15,400 including GST; the second invoice covers the period from 10 September 2014 until 28 November 2014 in the amount of $8,500 including GST; the final invoice covers the period 29 November 2014 to 7 August 2015 in the amount of $54,610. Mr Stenhouse of Counsel issued two invoices, one from 14 October 2014 to 5 November 2014 in the sum of $19,514 including GST and 2 reservation fees of $2,450, one including drafting Points of Claim; the second from 15 July 2015 until 6 August 2014 in the sum of $21,285 including GST. These invoices total $78,510 in solicitors’ fees and disbursements and $40,799 in counsel’s fees. If counsel’s reservation fees and GST on those fees are excluded, counsel’s fees would total $35,409. If the solicitors’ fees in the first invoice are reduced by half to exclude the period not covered by the period of the order, the fees would be approximately $7,700 for that period, or $70,810 in total. The Second Respondent’s costs would then total $106,219. Counsel for the Husband submits that the Bill of Costs should be itemised to ensure fairness to the Husband. The Legal Professional Uniform Law (NSW) provides[41] for bills to be issued in either itemised or lump sum form. The issue was raised at hearing as to whether it would be necessary for the Second Respondent solicitor’s invoices to be itemised and taxed. Mr Antonopoulos acknowledged that if indemnity costs were ordered, itemising the costs may be necessary if the parties could not agree on a figure. I accept this would be the usual course. However, given the length of time the matter has been before this Court, and the high level of costs incurred to date by all parties, I have determined to fix the amount of costs at a discounted figure to avoid even further costs to the parties and further delay in these proceedings being finalised. I have regard to the Second Respondent’s offer of 7 August 2015 in relation to costs in deciding that the Husband will pay the Second Respondent’s costs in the sum of $75,000.
[40] Annexure A of affidavit of Mr Antonopoulos dated 9 May 2016
[41] Section 186
The Wife deposes to the total of her legal fees (including disbursements) to 7 October 2014 at $51,657.91 and the total of her legal fees (including disbursements) from 8 October 2014 to the conclusion of the hearing at $76,000.38. The Wife seeks indemnity costs from the 8 October 2014. I am not persuaded the circumstances are so exceptional as to justify an order for indemnity costs in favour of the Wife. I also have regard to the Full Court’s decision in Kohan that the Court must consider the likely impact of any order on the financial circumstances of the party against whom the order is made. Until the commencement of the final hearing, the Wife was seeking an additional debt of $260,000 to the Second Respondent be included in the Balance Sheet and until the end of the hearing, the Wife was seeking an order for the Husband to take full responsibility for the debt to (omitted). While the Wife achieved the 70% of the overall net asset pool she was seeking, she was unsuccessful in her application to have the Husband accept responsibility for the full (omitted) debt.
Based on the Wife’s offers of settlement, and the Husband’s conduct in the proceedings, I have decided a costs order is justified in the circumstances of this case. To assess quantum the Court is guided by the costs calculated in accordance with Schedule 1 of the Federal Circuit Court Rules 2001 from the time of her first offer on 7 October 2014. Excluding daily hearing fees plus advocacy loadings for 2 of the 3 hearing days in November 2014 when the matter did not proceed to hearing, the Schedule provides (as it was at the relevant times) for a total of $25,428 made up as follows:
a)Preparation for final hearing (2 day matter) (November 2014) - $5,412
b)Preparation for final hearing (each additional hearing day after the second hearing day) (November 2014) – $1,158
c)Preparation for final hearing (2 day matter) (August 2015) - $5,412
d)Preparation for final hearing (each additional hearing day after the second hearing day) (August 2015) – $1,158
e)Daily hearing fee + 50% advocacy (one day only in November 2014) - $2,048 + 50% advocacy loading = $3,072
f)Daily hearing fee + 50% advocacy loading (three days in August 2015) - = $9,216
The Wife’s counsel contends that the Husband has the financial capacity to meet the costs claimed as he is due an estimated $156,000 (as also asserted by the Husband in his Financial Statement sworn June 2016) from the sale proceeds of Property A as well as an unquantified inheritance from his late father’s estate. I am satisfied a costs order in the sum of $20,000 is reasonable and I order accordingly.
Costs of the costs application
The Second Respondent did not seek her costs of the costs application in her Application in a Case, but her solicitor included the application in his Case Outline. The solicitor states that the Second Respondent seeks her costs of the costs application in accordance with Schedule 1 of the Federal Circuit Court Rules 2001.
As already noted, costs are governed by s.117 of the Act. In relation to the factors listed in s. 117(2A), I have regard to subparagraphs (a) (c), (e) and (f). I have regard to my finding that the Second Respondent made an offer on costs and to my previous findings. However, given the quantum of costs ordered in relation to the trial and given my findings as to the Husband’s disclosed financial circumstances, I have determined to make no further order for costs.
The costs ordered against the Husband in favour of the Wife and the Second Respondent will be paid from the Husband’s entitlement from the sale proceeds of the Property A property, being held in accordance with Order 11 of the Orders made 11 April 2016. It is anticipated the Husband will receive in excess of $150,000 which will be sufficient to meet the costs orders made.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of Judge Sexton
Date: 18 October 2016
Key Legal Topics
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Family Law
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Civil Procedure
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Costs
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