Searle and Pencious
[2013] FamCA 756
•13 September 2013
FAMILY COURT OF AUSTRALIA
| SEARLE & PENCIOUS | [2013] FamCA 756 |
| FAMILY LAW – COSTS – Application by wife for security of costs – Application Granted |
FAMILY LAW – COSTS – Application by wife for costs of the costs application – Application Granted
| Family Law Act 1975 (Cth) ss 117 and s 117(2) |
| Woodley & Time and Anor [2008] FamCA 162 Gerber & Bradley (Fmly Gerber) and Ors (Security for Costs) [2011] FamCAFC 206 Fenton & Marvel [2012] FamCAFC 150 |
| APPLICANT: | Ms Searle |
| RESPONDENT: | Mr Pencious |
| FILE NUMBER: | MLC | 11069 | of | 2008 |
| DATE DELIVERED: | 13 September 2013 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 31 July 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Wood |
| SOLICITOR FOR THE APPLICANT: | Adrian Abrahams Family Lawyer |
| COUNSEL FOR THE RESPONDENT: | Mr Carlile |
| SOLICITOR FOR THE RESPONDENT: | Altona Legal |
ORDERS
On or before 28 August 2013 the Wife shall pay to the solicitor for the Husband and to her solicitor the sum of $157,833.79 out of the monies otherwise payable by her to by the Husband pursuant to and in partial satisfaction of the property order made 28 May 2013 that she pay the Husband $346,720. Such sum of $157,833.79 is to be held as additional security for the costs payable but not yet finally determined pursuant to a costs order made 5 April 2012 in these proceedings (plus interest accrued on such costs, any costs of the assessment process and the costs of this application in a case); and such payment shall be subject to the following:-
a. The solicitor for the Husband and the solicitor for the Wife shall, within seven (7) days of the date of this order, open with a bank an interest bearing account in their names as trustee for the Husband;
b. The sum of $157,833.79 and accumulated interest shall remain in such trust account and shall be applied in payment of the costs order/s. Once the quantum of the costs pursuant to the April 2012 order has been finally determined together with any costs of the assessment, costs of this application and any interest, the amount of those costs and interest shall be paid out of the trust account to the Wife and the balance shall be paid to the Husband.
Leave is given to the parties to apply in relation to this order on the giving of seven (7) days notice to the other party and the Court, such leave to apply for a period of one (1) year from the date of this order or such other time as is determined within that one (1) year period.
The Husband must pay the costs of the Wife in respect of this security for costs application on a party/party basis as agreed or in default of agreement as assessed under the Family Law Rules 2004 (Cth).
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Searle & Pencious has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 11069 of 2008
| Ms Searle |
Applicant
And
| Mr Pencious |
Respondent
REASONS FOR JUDGMENT
introduction
In these proceedings Ms Searle (formerly Pencious (“the Wife”)) filed an application in a case on 25 June 2013 seeking a sum of money to be made available (out of the monies she was obliged to pay to Mr Pencious (“the Husband”)) or to be withheld as security for a costs order made in this Court on 5 April 2012.
The Wife also sought the costs of this application.
In support of her application the Wife relied upon her affidavit filed 25 June 2013 which was filed in evidence. Much of the material contained in that affidavit was not in issue namely:-
1.An order was made by this Court on 28 May 2013 that the Wife pay to the Husband $346,720 and that sum is due to be paid on 28 August 2013.
2.The Wife sought a retention from that sum of an amount of $157,833.79
BACKGROUND TO THE PROCEEDINGS
The background to the proceedings is set out at paragraphs 13 to 32 of the substantive reasons which I repeat here:-
13.At the time of the hearing the husband was aged 47 and the wife was aged 48. They met in the mid 1980’s and married and commenced cohabitation in September 1988.
14.The husband worked throughout the marriage until a date shortly before separation.
15.The wife undertook tertiary studies during the marriage and obtained a number of qualifications and degrees. She is now a psychologist by occupation and runs her own business. She earns a good income.
16.The wife claims she was the primary carer for the children and primary homemaker during the marriage. The husband disputes this assertion and claims that he was an equal or at least significant child carer and homemaker.
17.There are two children of the relationship, [C] and [K]. [C] is now aged nineteen and attends full time study at university. [K] is now aged sixteen, turns seventeen in August 2013 and studies full time. The children live with the wife and in 2012 the wife paid school fees for [K] of just under $9,000. The husband has not spent time with [C] since May 2009 and has not spent time with [K] since March 2010. There is an issue as to the cause of those circumstances, which issue I do not need to determine in the context of this proceeding.
18.In February 1990 the parties purchased a property at [O Street, Suburb L] (‘the matrimonial home”). In the early 1990’s the existing home on that property was demolished and a new home built. The parties entered into a contract with the wife’s father to build that new home. There is an issue as to the extent of the involvement of the wife’s father in that building.
19.The wife alleges that the husband was violent to her throughout the relationship and in particular assaulted her in March 2000, August 2001, April 2005 and November 2008. She alleges the husband assaulted [C] in October 2008, November 2008 and May 2009.
20.The wife claims that the parties separated in August 2008 but remained living under the one roof. The husband says they separated on 1 December 2008. Not much turns on whether that date was August or December 2008. In any event the wife and children left the matrimonial home on or about 1 December 2008 and the parties have not cohabitated since that date.
21.It is an agreed fact that shortly before 1 December 2008 the wife removed $165,000 in cash from the safe at the matrimonial home. There remain issues about the use of that money and whether a similar sum remained in the safe, which cash the wife alleges has been retained and used by the husband.
22.The husband was involved in a motor vehicle accident on 6 February 2009 and suffered injuries. He received periodic payments from the Victorian Transport Accident Commission from a time soon after the accident until February 2012. He is now in receipt of a disability pension. The husband claims he does not have capacity to be in paid employment, but the wife disputes that assertion.
23.In late 2011 the husband’s application for a ‘Serious Injury Certificate’ was rejected by the Victorian Transport Accident Commission. The husband has commenced proceedings in the County Court of Victoria to review that decision.
24.The wife commenced parenting and property proceedings in December 2008 and an Independent Children's Lawyer was subsequently appointed.
25.On 30 January 2009 the husband vacated the matrimonial home pursuant to a Court order.
26.On 26 February 2010 the husband filed an application seeking to join the wife’s parents to the proceedings. The husband sought an injunction to require the wife’s parents to pay money in their hands into trust, being the sum of $150,000 allegedly paid to them by the wife from monies which she took from a safe at the former matrimonial home. That application was dismissed.
27.On 3 December 2009 the husband filed an application in a case seeking to restrain the wife’s solicitor from acting in the property and parenting proceedings. Those proceedings were protracted and involved a number of interlocutory hearings. That injunction application was heard by Cronin J. The proceeding was conducted over two days in February 2011, two days in September 2011, and four days in February 2012, some eight hearing days. The husband was represented by senior counsel in that litigation.
28.On 28 February 2012, the husband’s application for the injunction was dismissed. The wife sought costs and on 5 April 2012 Cronin J ordered the husband to pay the wife’s costs of the proceedings on an indemnity basis. The husband was also ordered to pay the costs of the Independent Children's Lawyer.
29.The substantive proceeding was then placed in my docket. I did not have jurisdiction to make parenting orders in respect of [C], the elder child and the parenting application in respect of [K] was essentially abandoned.
30.The husband filed an appeal in relation to the order made on 28 February 2012. It is an agreed fact that that appeal was abandoned.
31.In his case outline, the husband sought an order that ‘there be no order in relation to the present costs dispute’. If that is an application for me to reconsider the indemnity costs orders made by Cronin J, I decline such invitation, as it is beyond the powers of this first instance Court.
32.The wife sought to adduce evidence of a doctor as to her father’s present health. However, that application to use that evidence was not pressed, the husband’s counsel having said that no adverse comment would be drawn about the wife’s father failing to give evidence in these proceedings.
THE RELEVANT LEGAL PRINCIPLES TO BE APPLIED
The general rule in relation to costs is that each party to the proceedings should bear his or her own costs of the proceedings. This general rule is subject to s 117(2), s 117AA and s 118 of the Act. A court may make such orders as to costs, whether by way of interlocutory order or otherwise, as the Court considers just. The Court is required not only to consider whether there are circumstances to justify the making of costs orders, having regard to s 117(2A) which sets out an inclusive list of the matters the court should have regard to. The determination of legal costs is a matter of judicial discretion.
I repeat the comments that I said in Woodley & Time and Anor [2008] FamCA 162 where I said:-
30.In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:
The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.'
31.In the absence of their being circumstances that justify the court making an order for costs, then s 117(1) provides that each party will bear his or her own costs of the proceedings under the act.
32.The interpretation to be applied to s117 and the inter relationship of s 117(1) and s 117(2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800. In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:
It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case.
Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.
Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19… (which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest... (at 75,054).
Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”
33.The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s 117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs.
34.By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”. I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL (2005) FamCA 118 the Full Court held at paragraph 41:
… Nowhere in subsection 2(A) or elsewhere in section 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 subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
35.In the matter of I and I (No. 2) FLC 92-625, the Full Court at p 82,277 said:
that the relevant matters in s 117(2A) “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.
36.In this case Nicholson CJ, Ellis and Baker JJ declined to follow the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case his Mushin J had said at p 81,271;
In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order was made.
37.The Full Court in I and I (No. 2) above, declined to follow this approach and held at p 82,277;
With respect ... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) 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. The financial circumstances of the parties are but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.
It is not in issue that an order was made by this Court on 5 April 2012 for the payment of costs on an indemnity basis. Similarly it is not in issue that a registrar of the Court made a preliminary assessment in relation to those costs in the sum of $156,609.30. The Wife asserts that there is interest on that sum, as at the date she swore her affidavit, totalling about $6,954.44 and she says there will be costs on the assessment of about $4,500 bringing the total up to $168,063.74.
The Husband was required to pay a bond of some $10,229.95 leaving a balance of about $157,833.79.
It is not in issue that the Husband has requested that those costs be taxed and his counsel conceded the sum of $38,723.80 as being the sum which the husband should be paid.
The Wife seeks security for those costs under s117 of the Family Law Act1975 (Cth) (“the Act”) or an injunction under s 114(1) and/or s 114(3) of the Act. The Husband opposes that application.
The Wife says that the Husband was the subject of damning findings made by the Court in its reasons of 28 May 2013. Further the Wife says that the only accessible assets (apart from the money to be payable by the Wife to the Husband) was the money in Greece which the Husband said had been lost and which would involve recovery overseas.
In these proceedings the Husband was the subject of a number of adverse findings about his credit when it came to money. These included but were not limited to:-
1.The availability of the funds in Greece in particular the loan which he now asserts is unrecoverable;
2.The sum of cash which the husband had access to from the safe at the time of separation, the existence of which the Husband denied; and
3.The alleged liabilities which were the subject of criticism in the substantive reasons.
Having regard to the findings in that respect and the Husband’s dissipation of funds after separation, I am satisfied that the Wife has justifiable concerns in relation to the availability of funds to meet the indemnity costs orders made in these proceedings.
Counsel for the Husband submitted there was little evidence of the Husband not complying with orders of the Court and, implicitly, not being frank in his dealings with the Court. I do not accept those submissions having regard to the litany of adverse findings made against the Husband in relation to the parties finance throughout these Reasons.
In my substantive reasons I enabled this application to be made having regard to the clear concerns I had about the reliability of the Husband and his frankness in respect of these proceedings.
PRINCIPLES GOVERNING AN APPLICATION FOR SECURITY FOR COSTS
Section 117(2), of the Act gives the Court the power to make an order for security of costs.
The law in relation to an application for security of costs have been set out in a number of case most recently in Gerber & Bradley (Fmly Gerber) and Ors (Security for Costs) [2011] FamCAFC 206, cited with approval by the Full Court in Gull & Gull [2013] and Fenton & Marvel [2012] FamCAFC 150. The Full Court in Gerber & Bradley (Fmly Gerber) and Ors (supra) said:-
2.In the recent decision of the Full Court (Coleman, Thackray and Strickland JJ) in Palma & Caleffi and Anor(Security for costs) [2011] FamCAFC 174 the following principles, which govern an application for security for the costs of an appeal, were set out (adopting what was said by an earlier Full Court (Finn, May and Thackray JJ) in Sawer & Sawer [2007] FamCA 140):
19. The power in this Court to make an order for security for costs is to be found in s 117(2) of the [Family Law Act 1975 (Cth) (“the Act”)], which is in the following terms:
If, in proceedings under this Act, the court is of [the] opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) 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.
20. The provisions of s 117(2A) are as follows (- s 117(4) and (5) are not presently relevant):
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.
21. The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:
a) the prospect of success of the litigation;
b) whether the claim for security is made bona fide;
c)whether or not an order for security would stifle the litigation;
d)whether or not the litigation may involve a matter of public importance;
e) whether or not there has been a delay in bringing the application for security;
f) whether there would be difficulty in enforcing an order for costs
(Luadaka v Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)
3.Also in Palma & Caleffi (supra) the Full Court set out the following observations made by the Full Court (Finn, Boland and Murphy JJ) in Halsbury & Halsbury [2008] FamCAFC 170; these observations have relevance in the present case:
…
34. Before concluding we take the opportunity to make the following observations regarding applications for security in relation to the costs of an appeal. Such applications appear increasingly to be taking up the time and resources of the litigants and of the Court. The proper place of such applications and the competing rights that lie at the heart of such applications need to be borne in mind by those seeking them.
35. Appeals are a part of our system of law. They operate as part of the proper checks and balances on the actions and decisions of trial judges. Litigants have a right to appeal in circumstances where they, properly and bona fide, allege error on the part of the trial judge (subject of course to the requirements in certain circumstances of leave to appeal being granted). That right to appeal is an important part of our system of law. It should not be fettered except for good reason.
36. The remedy for those who have a basic right to enjoy the fruits of their judgment and who have that right disturbed by an appeal which is ultimately held to be unmeritorious, is to receive confirmation of the right by the dismissal of the appeal, and, frequently, to have their costs met by the unsuccessful appellant. Although it needs to be recognised in this jurisdiction that s 117 of the Act has the potential to impact on the latter part of that remedy.
37. As we earlier indicated, in the present case both parties put before us relatively detailed arguments in support of, and in opposition to, each ground of appeal. Furthermore, in the present case the wife had already demonstrated her bona fides, by having prepared and filed the appeal books on 7 November 2007. Thus the appeal could well have been heard in the Full Court sittings in which the application for security was heard.
38. Indeed, in our view, and with great respect to the husband and those advising him, the hearing before us of the security application at which it should be noted the husband was able to be legally represented, would have been better devoted to the hearing of the appeal itself.
39. It is also important to stress (but without in any way reflecting on the conduct or intentions of those involved in the present case) that applications for security for costs should not be regarded as a method of funding a respondent’s costs of legal representation in an appeal. This consideration should particularly be borne in mind in this jurisdiction where the fundamental rule regarding costs is that contained in s 117(1) of the Act, being that each party pays his or her own costs.
DISCUSSION
The financial circumstances of each of the parties are as set out in the substantive reasons. The Wife will end up with the matrimonial home and she has a business and relatively strong income. The Husband will end up with assets totalling about $800,000 less his costs liabilities, some of which have been determined (at least in part) and some of which are yet to be determined.
The Husband asserts that he does not have an income earning capacity. I had some concerns about the veracity of that assertion to which I have alluded to in these reasons.
Neither party was in receipt of legal aid. Throughout the course of these reasons I have made criticisms of the Husband’s approach to the litigation and to his veracity. The Husband was not altogether helpful in terms of the proceedings.
In terms of whether the proceedings were necessitated of the Husband failure to comply with previous court orders, that is not a relevant consideration in this application.
Similarly each of the parties has been partly successful and partly unsuccessful although the Husband has been significantly unsuccessful although not wholly unsuccessful.
There is no evidence of any offers in relation to the question of security for costs.
It is likely that the Husband will be required to pay a significant sum to the Wife by way of indemnity costs pursuant to the existing costs orders. Having regard to the Husband’s approach in respect of various financial matters including but not limited to; his assertions about the cash in the safe, the money in Greece, the savings and money in his possession and control as at separation, there must be doubt as to whether money would be available for the payment of the Wife’s costs in the event that the security was not divided.
The security will not stifle the litigation. There are no issues of importance.
There was no delay in bringing the application.
It is clear that there is likely to be difficulty in enforcing the order for costs in the event that the order for security was not made.
One of the applications made by the Wife was that the Husband pays her costs of this application. Counsel for the Husband said that such application ought to be dealt with separately once the question of costs had been determined. The problem with that approach would of course mean that it would become circular. Once I had made a determination on costs then there may be a determination in respect of that costs determination. In this aspect of the costs determination I have had regard to the authorities such as Penfold v Penfold (1980) FLC 98-800 and Brown v Brown (1998) FLC 92-882 and other authorities.
I have had regard to the financial circumstances of the parties as set out in my reasons and their ability to earn income including the significant income earned by the Wife. Neither party is in receipt of legal aid.
In terms of the costs proceedings the Husband has acted appropriately. He was entitled to challenge the preliminary assessment made by the Registrar and has paid the bond required by the Registrar. These proceedings were not necessitated by the failure of a party to the proceedings to comply with previous orders of the Court.
The parties have not provided details of any offers.
The Husband has, to all intents and purposes, been entirely unsuccessful in this aspect of the case.
However, it was reasonable for the Wife to anticipate that her costs would be paid by the Husband and those costs are substantial. Having regard to the quantity and significance of the adverse findings against the Husband he could have reasonably anticipated that the Wife would have been provided with the security for costs sought by her.
Whilst a small part of the time involved in this aspect was with respect to the costs application of the Husband, the majority of the time related to the issues between the application of the wife and the application of the intervener.
Having considered all of the evidence and the applications I am satisfied that there ought to be an order for security for costs and further that the husband should meet the costs of the wife’s application for security for costs on a party/party basis.
I certify that the preceding thirty five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 13 September 2013.
Associate:
Date: 13 September 2013
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