Scott and Scott (No. 2)

[2019] FamCA 599

FAMILY COURT OF AUSTRALIA

SCOTT & SCOTT (NO. 2) [2019] FamCA 599

FAMILY LAW – COSTS – PRACTICE AND PROCEDURE – Adjournment – Where the parties are involved in a dispute about the division of property under Part VIII of the Family Law Act 1975 (Cth) – Where the parties’ preliminary dispute over the validity and enforceability of a binding financial agreement was listed for trial over three days – Where the applicant wife failed to properly and comprehensively plead her case – Where the respondent husband sought an adjournment of the trial so the wife could file amended pleadings enabling him to understand and answer the totality of her case with supplementary evidence – Where the husband also made an application for the wife to pay his costs of the trial thrown away – Where the wife’s conduct of the proceedings entitled the husband to an order for costs – Ordered the parties’ applications for property settlement relief is adjourned – Ordered the wife pay the husband’s costs of and incidental to the trial thrown away by the adjournment of the trial – Where such costs to be paid on a party/party basis in the sum agreed or assessed.

Family Law Act 1975 (Cth) Part VII, ss 90C, 90G, 90K, 90KA, 117

Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin & Limousin(Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Yunghanns & Yunghanns (2000) FLC 93-029; [2000] FamCA 681

APPLICANT: Ms Scott

RESPONDENT: Mr Scott

FILE NUMBER: CRC 105 of 2016

DATE DELIVERED: 22 August 2019

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Austin J

HEARING DATE: 22 August 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Not Applicable

SOLICITOR FOR THE APPLICANT: Not Applicable

COUNSEL FOR THE RESPONDENT: Mr Carolan

SOLICITOR FOR THE RESPONDENT: Green & McKay

Orders

1. The wife shall pay the husband’s costs of and incidental to the trial, fixed from 19 to 21 August 2019 inclusive, thrown away by reason of the adjournment of the trial, such costs to be paid on a party/party basis in the sum agreed or assessed.

2. The proceedings are re-fixed for trial before Justice Austin at 10:00 am on Monday, 4 November 2019, for a period of three days.

3. The setting down and trial fees shall be paid by the parties in equal shares, within one month of the date of these orders.

4. The applicant wife shall file and serve by Friday, 6 September 2019, an amended Statement of Pleadings (with proper and sufficient particulars) setting out the grounds upon which she alleges:

   a.The Financial Agreement signed by her on 20 December 2010 and by the respondent husband on 4 February 2011 (“the Financial Agreement”) is not binding upon them pursuant to s 90G of the Family Law Act, or if binding

   b.The Financial Agreement should be set aside pursuant to the provisions of ss 90K and 90KA of the Family Law Act. 

5. The respondent husband shall file and serve any Amended Response by Friday, 13 September 2019.

6. The respondent husband shall file and serve such further affidavits upon which he wishes to rely at trial in response to the wife’s amended Statement of Pleadings by Friday, 27 September 2019.

7. In the event that Ms DD, solicitor, is unwilling to furnish the respondent husband with an affidavit in these proceedings, leave is granted to the husband to issue to Ms DD a subpoena requiring her attendance at Court on Monday, 4 November 2019.

8. The applicant wife shall file and serve by Friday, 11 October 2019, any affidavit in reply to any supplementary affidavit filed and served by the husband pursuant to Order 6 hereof.

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 Scott & Scott (No. 2) 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 NEWCASTLE

FILE NUMBER:  CRC 105 of 2016

Ms Scott

Applicant

And

Mr Scott

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. The applicant wife and the respondent husband remain in dispute about the division of their property under Part VIII of the Family Law Act 1975 (Cth) (“the Act”). During their marriage, the parties executed a financial agreement under s 90C of the Act which, by purported compliance with s 90G of the Act, is said by the husband to be a binding financial agreement which ousts the Court’s jurisdiction under Part VIII of the Act. The wife now asserts it is not a binding financial agreement but, if it is, she seeks to set it aside and enliven the Court’s jurisdiction under Part VIII of the Act.

2. To that end, the parties’ preliminary dispute over the validity and enforceability of the binding financial agreement was listed for trial before me for three days commencing on Monday 19 August 2019. 

3. Months in advance of the trial, on 8 May 2019, procedural orders were made for the wife to plead and particularise her claim for relief in respect of the binding financial agreement. In response to that procedural order, the wife filed a document entitled “Points of Claim” on 27 May 2019. The document is discursive and does not elucidate the wife’s claim with the clarity I had hoped, but, doing the best I can, the wife’s case was posited on the following basis: 

   (a)she signed the financial agreement under duress, since she was the victim of family violence perpetrated by the husband from as early as 2006, thereby rendering the agreement “void, voidable or unenforceable” pursuant to ss 90K(1)(b) and 90KA of the Act;

   (b)the husband’s family violence amounted to unconscionable conduct in so far as it affected the making of the agreement, which renders the agreement unenforceable pursuant to ss 90K(1)(e) and 90KA of the Act;

   (c)the agreement did not deal with the parties’ existing or future liabilities, thereby rendering the agreement:

   (i)void under s 90K(1)(aa)(ii) of the Act;

   (ii)void under s 90K(1)(b) of the Act; or

   (iii)impracticable to carry out within the meaning of s 90K(1)(c) of the Act;

   (d)the agreement is now impracticable to carry out and so should be set aside under s 90K(1)(c) of the Act due to the subsequent inter-mingling of property interests between the parties’ self-managed superannuation fund and a family trust; and

   (e)the husband, in numerous different ways, acted contrary to the terms of the agreement after the parties’ separation and so it is now impracticable to carry out the agreement and it should be set aside under s 90K(1)(c) of the Act.

4. As can be seen, the wife did not contend the financial agreement never attained the status of a binding financial agreement at all for failure to observe the necessary criteria set out within s 90G of the Act. The absence of any pleading to that effect implied her admission it fulfilled the statutory criteria, though she contends it should now not be binding for a variety of reasons. The husband prepared for trial on that basis.

5. On 14 August 2019, only a couple of days before trial, the wife filed a Case Outline document which appeared to materially expand her case by challenging the agreement’s status as a binding financial agreement in the first instance. For example, she alleged the independent advice she received from her solicitor was “limited and did not include the effect of the agreement on [her] rights, nor advantages or disadvantages of the agreement”. She also alleged the husband did not establish she received independent legal advice pursuant to s 90G(1)(b) of the Act.

6. The wife also expanded her case by reliance on equitable principles. She sought to argue the agreement was unenforceable “due to the operation of laches”, contending the husband had lost his right to insist on performance of the contract “due to unreasonable delay and negligence”. That was not pleaded.

7. The wife also expanded her claim about the husband’s alleged unconscionable conduct. She asserted he was “the stronger party at the time of the making of the agreement” for a number of reasons which she enumerated. That was not pleaded.

8. The wife also asserted her reliance upon the doctrine of “undue influence”, which she did not formerly plead in her Points of Claim. She asserted in her Case Outline document:

   Where a presumption of undue influence arises from a particular relationship or circumstances, the onus falls on the stronger party to rebut the presumption.

9. The numerous discrepancies between the wife’s pleadings and the submissions made in her Case Outline document were drawn to her attention at the commencement of the trial. She initially agreed to proceed with the trial, confined to only her pleaded case, but when objections were then taken by the husband’s counsel to parts of her affidavit she recanted and said she wanted to press all of the claims encompassed within her Case Outline. 

10. The husband did not object to the wife being able to do so but, understandably, he contended he could not meet her expanded claims in the current trial because he needed to adduce more evidence to meet her claims, including from the wife’s former solicitor, whom he envisaged could confirm the nature of the independent advice given to the wife about the financial agreement to counter the wife’s claims of its deficiency. If the wife now asserts the legal advice she received was deficient then, in all probability, she waives the privilege she enjoys in the advice, enabling the solicitor to give her version of it.

11. The husband applied for an adjournment of the trial so the wife could file an amended pleading of her claim, thereby enabling him to understand and answer it with supplementary evidence. The adjournment was, in the circumstances, irresistible and was accompanied by an application for the wife to pay the husband’s costs of the trial thrown away. The husband sought that his costs be assessed on an indemnity basis and not merely a party/party basis. For her part, the wife resisted paying any costs at all. These reasons explain the costs order I intend to make in the husband’s favour.

12. In proceedings under the Act, the ordinary rule is that each party to the proceedings shall bear his or her own costs (s 117(1)). However, if the Court is of the opinion that there are justifying circumstances, a costs order may be made (s 117(2)). In that event, the Court is required to take into account the factors specified in s 117(2A) of the Act.

13. Inferentially, if not expressly, the husband’s entitlement to costs is predicated upon the wife’s conduct of the proceedings. She failed to properly and comprehensively plead her case pursuant to the procedural orders made on 8 May 2019 (s 117(2A)(d)) and, when confronted with that reality at trial, she insisted on being able to conduct her case in the way she wished without regard to her past pleadings (s 117(2A)(c)).

14. It may well have been open to force the wife to proceed with the trial confined to her pleadings, given the litigation has already been afoot for over three years, but the husband did not take such an oppressive approach. He acceded to the wife being given the chance to conduct her case as she sees fit, provided his costs thrown away by the necessary adjournment were reimbursed. 

15. Despite having her attention expressly drawn to the mandatory considerations within s 117(2A) of the Act, the only basis upon which the wife resisted a costs order was that her financial circumstances would not permit her to meet such an order (s 117(2A)(a)). The husband denied her assertion and so the costs application was adjourned for two days to enable the wife to file and serve a financial statement in the interregnum to verify her contentions. She filed her financial statement as directed on Wednesday 21 August 2019. The financial statement reveals she has income of $1,170 per week, net of income tax and excluding her receipt of child support paid by the husband, noting the parties’ child lives with them for equal time. As for capital, the wife deposed to her ownership of assets worth over $2 million and her liability for debts of about $600,000, excluding some $300,000 of debt for legal fees. Relying upon the accuracy of that evidence, I am not satisfied the wife’s financial circumstances preclude her payment of the husband’s costs thrown away by the adjournment of the trial that her conduct certainly necessitated.

16. I am satisfied the wife should pay the husband’s costs thrown away by the adjournment of the trial. The real question is how the costs should be quantified. It is well established that an order for indemnity costs will only be made in exceptional circumstances (Kohan & Kohan (1993) FLC 92-340; Yunghanns & Yunghanns (2000) FLC 93-029; Limousin & Limousin(Costs) (2007) 38 Fam LR 478). The features of the wife’s conduct relied upon by the husband to vindicate his entitlement to costs are those which warrant deviation from the orthodox principle that each party should bear their own costs in proceedings under the Act, but I am not satisfied they additionally warrant the wife’s payment of costs on an indemnity basis. An order for payment of party/party costs is appropriate.

17. In those circumstances, I will order the wife to pay the husband’s costs of and incidental to the trial, fixed from 19 to 21 August 2019 inclusive, thrown away by reason of the adjournment necessitated by the wife’s conduct of it, with such costs to be paid on a party/party basis in the sum agreed or assessed. 

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 22 August 2019.

Associate: 

Date:  26 August 2019