Sfakianakis & Sfakianakis - [2019] FamCAFC 54

FAMILY COURT OF AUSTRALIA

SFAKIANAKIS & SFAKIANAKIS

[2019] FamCAFC 54

FAMILY LAW – APPEAL – COSTS – Special costs order – Application for indemnity costs – Where the appeal was wholly unsuccessful – Offers of compromise – Conduct of the proceedings – Where the appellant abandoned much of his case on the day of the appeal – Where the appellant’s original Summary of Argument contained outlandish, indefensible and reckless submissions – Where the respondent has failed to comply with r 22.53(3) of the Family Law Rules 2004 (Cth) – Where the circumstances warrant a special costs order – Order for costs in a fixed sum.

Conveyancing Act 1919 (NSW) s 38
Family Law Act 1975 (Cth) s 117

Family Law Rules 2004 (Cth) rr 22.53(3)

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
D & D (Costs) (No. 2) (2010) FLC 93-435; [2010] FamCAFC 64
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178

APPELLANT:

Mr Sfakianakis

RESPONDENT:

Ms Sfakianakis

FILE NUMBER:

SYC

4232

2015

APPEAL NUMBER:

2018

DATE DELIVERED:

28 March 2019

PLACE DELIVERED:

Sydney

PLACE HEARD:

In chambers

JUDGMENT OF:

Aldridge, Watts & Austin JJ

HEARING DATE:

Heard by way of written submissions

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

22 December 2017

LOWER COURT MNC:

[2017] FamCA 1103

REPRESENTATION

SOLICITOR FOR THE APPELLANT:

HAL Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Nagle

SOLICITOR FOR THE RESPONDENT:

McNally Jones Staff Lawyers

Orders

The appellant is to pay the respondent’s costs fixed in the sum of $17,500.00.

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 Sfakianakis & Sfakianakis has been approved by the Chief Justice pursuant to s121(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).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 21 of 2018
File Number: SYC 4232 of 2015

Mr Sfakianakis

Appellant

And

Ms Sfakianakis

Respondent

REASONS FOR JUDGMENT

On 21 September 2018, we dismissed the appeal in these proceedings and ordered Ms Sfakianakis (“the respondent”) to notify Mr Sfakianakis (“the appellant”) and any other relevant person in writing of the nature of the costs orders she intended to seek against him or them and to then notify the Appeals Registrar she had done so.
On 8 November 2018, the respondent filed written submissions concerning her entitlement to costs, together with an affidavit adducing evidence of an offer of compromise she made to the appellant in April 2018 to settle the appeal, which offer was not accepted.
The respondent sought that the appellant pay her costs of and incidental to the appeal on an indemnity basis, but alternatively, on an ordinary party and party basis. The costs application was not made against any other person, including the appellant’s lawyers, as had been hinted by the respondent during the appeal.
The appellant filed written submissions in reply on 28 November 2018. He resisted any costs order being made on either basis.
For reasons we will discuss below, on 7 February 2019 we directed the respondent to comply with r 22.53(3) of the Family Law Rules 2004 (Cth) (“the Rules”) on or before 21 February 2019 and to file a schedule of costs claimed and any further submissions as to the quantum of any costs order.
A schedule of costs, but nothing else, was filed.
We also directed the appellant to file any submissions in response by 7 March 2019 but again nothing was filed.
For the reasons that follow, we are not satisfied that an indemnity costs order should be made in favour of the respondent. We are of the view, however, that the circumstances warrant an award of costs greater than party and party costs.
The ordinary position in proceedings under the Family Law Act 1975 (Cth) (“the Act”) is that each party is to bear his or her own costs (s 117(1)). Where the Court is of the opinion that circumstances justify it in doing so, the Court may make such order as to costs as it considers just (s 117(2)). Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional (Kohan and Kohan (1993) FLC 92-340 at 79,614; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
It is, however, a mistake to think that if a costs order is made, that order can only be on a party and party basis or on an indemnity basis. The words “such order as to costs … as the court considers just” permit the Court to fashion an order that is apt to the circumstances. One such well-known example is assessment on a trustee basis, which is more generous than party and party costs, but falls short of an indemnity. Orders for a partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order. For convenience, in these reasons we shall refer to such orders as a “special costs order”.
Decisions as to the appropriate basis for any costs order are, of course, guided by principle. In applications under s 117 of the Act for costs of whatever kind, the Court must have regard to the considerations set out in s 117(2A). Paragraph (g) requires the Court to take into account any relevant matter.
As the decision in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233–234 (“Colgate-Palmolive”) and the extensive authorities referred to in it make clear, the categories for the making of special costs orders are not closed and may be made whenever the particular facts and circumstances warrant it. That position is reflected in s 117(2) of the Act.
It is necessary to consider first whether there should be an order for costs before turning to whether the quantum of the costs should be left to the application of the scale contained within Sch 3 of the Rules or assessed or fixed on some other basis.
The respondent first relied upon an offer of settlement dated 5 April 2018 (s 117(2A)(f)). The primary judge ordered the appellant to pay $588,726 to the respondent by way of final property settlement. The offer to settle the appeal was for a payment of $580,000 with no order as to costs. That offer was not accepted, and the appellant has been left with the original obligation.
The appeal was wholly unsuccessful (s 117(2A)(e)) and the appellant abandoned much of his case on the day of the appeal (s 117(2A)(c) and (g)).
These three matters comfortably justify an order for costs.
Turning then to whether the costs should be on a basis other than party and party costs, it is necessary to look more closely at the conduct of the proceedings.
First, numerous outlandish and indefensible submissions were made in the appellant’s original Summary of Argument filed 4 July 2018, such as the following:
(a)The primary judge’s decision “supports the incorrect assumption and notion that there is a starting point in cases involving Family Law that everything is split and that the parties will receive 50/50”;
(b)The “Family Court is a place where the law of fraud does not apply”;
(c)The “law of justice and of equity is somehow devoid of a meaning in the Family [C]ourt that it has nowhere else”;
(d)In “all cases of fraud, Courts must not seek to depart from the basic maxim that they will never seek to assist a fraudster”; and
(e)The “jurisdiction to have exercised the discretion [under s 79] did not exist”.
In respect of such contentions, the respondent unsurprisingly submitted:
The arguments raised by the appellant were contrary to authority, contrary to the position adopted below and contrary to the scheme of the Family Law Act. The respondent wife was required to meet these arguments despite their obvious flaws. In doing so the wife was required to incur costs which were not reasonably necessary to have incurred [sic]…
Her retort was correct and commendably restrained.
Second, the appellant recklessly made false submissions in his original Summary of Argument, which the respondent needed to be prepared to meet. The following submissions are examples:
(a)The proceedings at first instance were commenced only following the appellant’s discovery of the mortgage secured over his real property.
(b)The respondent did not reveal until the trial how money was extorted from her by criminals, causing her to raise a bank loan and secure it by mortgage over his property, which false allegation the appellant repeated in his costs submissions.
(c)The written agreement the parties struck in October 2014 was a “deed”, which he at least implied enhanced its binding effect.
(d)He was the owner of a certain parcel of real property for over 30 years.
(e)The respondent did not account for the $225,000 she received when the parties divided their funds in 2014.
As to the submission set out at (a), the proceedings were in fact commenced in June 2015 by the respondent, not by the appellant. In any event, he knew of the mortgage well before then. He deposed he discovered the mortgage in February 2015, which caused him to commence the Supreme Court proceedings in March 2015 seeking relief from the mortgage. In cross-examination, the appellant even deposed he learned of the mortgage in 2014 (Transcript, 26 September 2017, p.191 lines 4-24).
As to (b), the trial took place in September 2017 and the appellant knew of the alleged extortion well before that. The respondent deposed in her trial affidavit, filed in July 2017, to her disclosure to the appellant of details about the extortion during a meeting between them and their lawyers in December 2015. She was not challenged about the truth and accuracy of that evidence during cross-examination (Transcript, 26 September 2017, p.155). In fact, the appellant’s counsel posed a leading question to the respondent at trial inviting her affirmation that her solicitors wrote to his solicitors about the extortion in December 2015 (Transcript, 25 September 2017, p.93 line 4).
The submission recorded at (c) is patently incorrect. The written agreement was not a “deed”. It was an agreement and was styled as such, since it was entitled “Agreement”. It was signed, but not sealed or attested and so did not conform to s 38 of the Conveyancing Act 1919 (NSW).
In terms of the submission made at (d), while the appellant might have been the legal owner of the property for that long, he only beneficially held exclusive title to the property after he purchased his children’s one-half interest in 1998.
Finally, as to (e), in fact the respondent did account for that sum in her trial affidavit filed in July 2017. She was cross-examined about it (Transcript, 25 September 2017, p.119) and she then gave substantially the same explanation for its expenditure.
Understandably, time and money were wasted grappling with such false and misconceived submissions.
These submissions were considerably modified at the hearing of the appeal because senior counsel who appeared (but who did not settle the Summary of Argument) abandoned two grounds of appeal and eschewed much of the Summary of Argument. Nonetheless, as is apparent from our reasons for dismissing the appeal, it was one that faced great difficulty.
In Colgate-Palmolive, in summarising the effect of the many authorities to which he referred, Sheppard J said at 233 that instances where indemnity costs orders have been made include proceedings continued “in wilful disregard of known facts or clearly established law” and those that involve the “undue prolongation of a case by groundless contentions”.
We consider that both these considerations apply to the abandoned grounds of appeal and much of the Summary of Argument. The respondent was required to deal with and respond to all the matters raised in the Notice of Appeal, even though the allegations were outlandish, indefensible, reckless and doomed to fail, no doubt at considerable expense to her. Such a description clearly identifies this as an exceptional case in which more than party and party costs should be paid. The circumstances of this case justify a special costs order.
The respondent also relied on the submission that serious allegations of fraud were made by the appellant without foundation. It must be accepted, however, that the primary judge found that the respondent deceived the appellant into signing a mortgage, although, as matters turned out, to no financial disadvantage to him. Thus, the allegations of fraud could not be said to be groundless. However, as we have said, the statements as to the respondent’s conduct and its effect were reckless. We have already taken this consideration into account.
We do not consider that the refusal of the offer of compromise was sufficiently imprudent, of itself, to justify an order for indemnity costs but it supports a finding that aspects of the appellant’s conduct in relation to the appeal were not reasonable.
Overall, we consider that a special costs order should be made.
Rule 22.53(3) of the Rules provides that a party applying for an order for costs on an indemnity basis must inform the Court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
The respondent has not complied with the rule despite being given an extension of time in which to do so.
The purpose of the rule is obvious. It is to inform the Court and the party against whom the costs order is sought as to how the costs the subject of the proposed order are calculated. It permits the Court and the other party to assess the reasonableness or otherwise of the proposed costs order and whether it is proportionate to the nature of the proceedings. An indemnity costs order is not a blank cheque permitting the successful party to pay his or her lawyers the amount they, or the lawyers, see fit.
Further, it has been the settled practice of this Court for some time to require parties seeking a costs order to hand to the Court a schedule of the costs sought. Directions to that effect are now regularly made when the appeal is fixed for hearing. The purpose of this practice is to permit the Court, wherever possible, to fix the quantum of any costs to be paid so as to avoid the parties being involved in lengthy, contentious and expensive assessment of the costs. This is all the more important where costs are sought on a basis other than party and party costs.
As we have recorded, the respondent has now filed a schedule of her costs. The total is $21,985.83 inclusive of GST.
Having regard to the relatively modest amount of the costs sought we are prepared to proceed in the absence of the costs agreement.
As we have said, the Court is not bound only to make an order on a party and party basis or on an indemnity basis. It may take an intermediate course if that is the order that is just in all of the circumstances. A special costs order may be assessed by reference to a particular period of time or set of events. Alternatively, the Court may fix a sum for costs that exceeds party and party costs but falls short of an indemnity.
Taking all these matters into account we are of the view that the appropriate order is that the appellant pay the respondent’s costs fixed in the sum of $17,500.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Watts & Austin JJ) delivered on 28 March 2019.

Associate:

Date: 28 March 2019