Sigley and De Santis

[2017] FamCA 246

FAMILY COURT OF AUSTRALIA

SIGLEY & DE SANTIS [2017] FamCA 246

FAMILY LAW – COSTS– Section 117(2A) factors – where wife instituted proceedings seeking that a financial agreement be enforced as if an order of the Court – where the husband has consistently failed to comply with orders of the Court made in the course of the proceedings – where the husband was wholly unsuccessful – circumstances justifying an order for costs – no exceptional circumstances justifying costs on an indemnity basis – orders made that the husband pay the wife’s costs on a party/party basis

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Brown & Brown (1998) FLC 92-822
Browne & Green (2002) FLC 93-115
Colgate–Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Greedy and Greedy (1982) FLC 91-250
Kelly and Kelly (No 2) (1981) FLC 91-108
Kohan & Kohan (1993) FLC 92-340
Nada & Nettle (Costs) (2014) FLC 93-612
Nemeth and Nemeth (1987) FLC 91-844
Oriolo & Oriolo (1985) FLC 91-653
Stephens & Stephens (2010) 44 Fam LR 117

APPLICANT: Ms Sigley

RESPONDENT: Mr De Santis

FILE NUMBER: MLC 9296 of 2015

DATE DELIVERED: 13 April 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: In Chambers

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Strum QC

SOLICITOR FOR THE APPLICANT: Peter Szabo Family Law

THE RESPONDENT: No appearance

Orders

IT IS ORDERED THAT

1. The husband pay the wife’s costs of and incidental to her Initiating Application filed 1 October 2015, the husband’s Response to Initiating Application filed 5 November 2015, the wife’s Application in a Case filed 9 February 2016 and her Application in a Case filed 15 February 2016 as agreed and in default of agreement to be assessed on a party/party basis.

IT IS CERTIFIED THAT

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel including solicitor acting as counsel on 21 October 2016.

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 Sigley & De Santis 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 MELBOURNE

FILE NUMBER: MLC 9296  of 2015

Ms Sigley

Applicant

And

Mr De Santis

Respondent

REASONS FOR JUDGMENT

1. On 14 November 2016 I struck out the husband’s Response to Initiating Application filed 5 November 2015 and made orders pursuant to s 90UN of the Family Law Act1975 (Cth) (“the Act”) that allowed for paragraph 6 of the Financial Agreement dated 24 October 2013 made between the parties pursuant to s 90UC of the Act (“the Agreement”) to be enforced as if it were an order of the Court.

2. On that date, I also made orders for the filing of written submissions in support of any application with respect to the costs of and incidental to the wife’s Initiating Application filed 1 October 2015, her Application in a Case filed 9 February 2016 and the husband’s Response to Initiating Application filed 5 November 2015.

3. On 29 November 2016 the wife filed a submission seeking that the husband pay her costs of the above mentioned applications on an indemnity basis. In the alternative, she seeks that the husband pay these costs on a party/party basis.

4. The wife also seeks an order that the husband pay her costs of and incidental to her Application in a Case filed 15 February 2016. The wife in that application sought an order restraining the husband, his servants or agent from doing any act or thing or attempting to do any act or thing to place himself in voluntary bankruptcy. On 2 March 2016 Bennett J made an order by consent in those terms. The husband who was represented at the time also consented to an order for the reservation of the wife’s costs of both her Application in a Case dated 3 February 2016 which it appears was not formally filed until 9 February 2016 and had been adjourned for hearing before her Honour and her Application in a Case filed 15 February 2016. Although the orders I made did not make provision for the filing of submissions in relation to the costs of the wife’s Application in a Case filed 15 February 2016 as the wife’s costs of that application were reserved and in circumstances where the applications arise out of the same circumstances and the same substantive proceedings I also propose to deal with that wife’s application for the payment of those costs. Although the husband was served with the wife’s submissions in support of her application for costs including her application that he pay the costs of and incidental to her Application in a Case filed 15 February 2016 he did not file any response to the wife’s submissions, and in those circumstances her application for costs is unopposed.  

Legal Principles

1. The general rule in proceedings in this Court is that parties to those proceedings each bear their own costs unless there are circumstances which justify the Court departing from that rule (s 117(2) of the Act).

2. In determining what (if any) order should be made the Court must have regard to the following matters pursuant to s 117(2A) of the Act:

   (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.

3. The Court’s discretion is broad and as Kay J said in Brown & Brown (1998) FLC 92-822 not one of the matters in s 117(2A) takes precedence over another and one factor may be enough.

Discussion

1. The wife submitted that there are circumstances justifying the Court making an order for costs having regard to s 117(2A) of the Act and in particular relied on the following matters

   ·the financial circumstances of the parties;

   ·the conduct of the husband in the proceedings;

   ·the fact that proceedings were necessitated by a failure of the husband to comply with previous orders;

   ·the husband was wholly unsuccessful in the proceedings; and

   ·a failure to order costs would reward the unacceptable behaviour of the husband and penalise the wife.

2. While the wife did not refer directly to any of the other considerations in s 117(2A), in deciding whether the circumstances of this case justify the making of an order for costs, the discretion of the Court must be exercised having regard to all of those considerations to the extent that they are relevant.

Section 117(2A)(a) of the Act: The financial circumstances of each of the parties to the proceedings

1. The wife submits that she is in a relatively modest financial position. In her Financial Statement filed 1 October 2015 the wife discloses a total average weekly income of $1,932. According to her Financial Statement she has property worth $3,593,363, superannuation of $138,000 and liabilities of $1,871,341. Whilst I would not necessarily describe her position as “relatively modest”, that would not of itself necessarily mean, subject to the other matters the Court is required to consider, that the Court would not make an order for costs in her favour.  

2. The husband in his Financial Statement filed 5 November 2015 deposes that he has no income, owns property worth $1,001,000, superannuation worth $342,387 and has liabilities of $3,746,841. On the basis of these Financial Statements, there is a significant disparity between the financial circumstances of the parties with the husband’s financial position appearing to be substantially weaker than that of the wife’s. Although the wife acknowledges that the husband’s Financial Statement filed 5 November 2015 suggests he is in a poor financial position she also submits that the financial position of the husband as outlined in his Financial Statement is not accurate and that in circumstances where he has “stalwartly refused to comply with orders of the Court which would have assisted in evidencing the financial position he asserted” the court should take a cautious approach to his evidence. I accept that submission.

3. There are cases in which a disparity in financial resources between the parties may justify an order for costs in favour of the party with less financial resources [Kelly and Kelly (No 2) (1981) FLC 91-108]. As the Full Court said in Browne & Green (2002) FLC 93-115, in some cases a disparity in the parties’ financial circumstances may be critical to the determination as to whether costs should be ordered and in other cases is can be of little or no relevance.

4. In Nada & Nettle (Costs) (2014) FLC 93-612 (“Nada”) the Full Court also said at [11] that if “a party is impecunious, even indigent, is not a bar to the making of a costs order if the Court is otherwise of the opinion that such an order ought to be made”.

5. The difficulty in this case is that the husband’s financial circumstances are largely unknown. He has failed to comply with orders that would have helped shed some light on his true financial position. If the husband is in fact impecunious, he has had multiple opportunities to provide information to the Court to demonstrate this and he has also had the opportunity to respond to the wife’s submission for costs. The husband has chosen not to avail himself of these opportunities.

6. In any event even if the Court were satisfied that the husband was impecunious that would not necessarily preclude the court making an order that he pay the wife’s costs if it were to be otherwise satisfied that there were circumstances that would justify it doing so.

Section 117(2A)(b) of the Act: Whether any party to the proceedings is in receipt of assistance by way of legal aid

1. Neither the husband nor the wife was in receipt of legal aid.

Section 117(2A)(c) of the Act: 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

1. In my Reasons for Judgment of 14 November 2016 I have detailed the history of the proceedings between the parties. Without intending to reproduce those Reasons here in full, I have found that the husband has consistently failed to comply with orders for discovery, notwithstanding that in some cases those orders were made by consent, and since his solicitors’ ceased acting on his behalf he has not participated in the proceedings in any real sense, either in response to the applicant’s various applications or to prosecute his own case. Since filing his Response to Initiating Application on 5 November 2015 the respondent has done nothing other than to consent to orders which he has then chosen to disregard.

2. The wife submits that the husband did not formally discontinue proceedings in circumstances where he had clearly determined he would not pursue them further, which delayed the final outcome and increased the costs incurred by her.

3. The husband’s accountant provided letters to the Court, which outlined, among other things, that:

   ·the husband is suffering from a form of muscular dystrophy, is severely disabled due to that condition, with limited use of his limbs which prevents him writing;

   ·the husband requires a carer to carry out basic daily chores including going to the toilet;

   ·the husband does not have the resources to pay for legal representation and that he has been advised that legal aid will not be forthcoming.

4. Although the husband’s solicitors filed a Notice of Ceasing to Act on 7 June 2016 the husband had by that time already failed to comply with orders made 5 November 2015, 2 December 2015 and 2 March 2016. While I accept that the husband may be disabled, that does not explain why he was able to give instructions for and swear a detailed affidavit in support of his case, transfer his Maserati to his mother, make application for a disability benefit and surrender his life insurance policy.  I am not satisfied that the husband’s disability would have prevented his compliance with the orders made by the Court for discovery.

5. It is well settled that when a party acts unreasonably in failing to produce documents in accordance with orders made by the Court or the obligations imposed upon them by the Act and the Family Law Rules 2004 (Cth) (“the Rules”) and obstructs the other side, an order for costs may be justified. 

6. The husband’s decision to ignore the orders of the Court, which included orders to which he had consented, is unacceptable and demonstrates his disregard for the Court and the orders it makes. The wife on the other hand has conducted the litigation appropriately, diligently pursuing the orders she seeks with respect to the enforcement of the Agreement and the husband’s compliance with the orders of the Court.

Section 117(2A)(d) of the Act: Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

1. The wife submits that the proceedings were necessitated by the failure of the husband to comply with the terms of the Agreement entered into on 24 October 2013.

2. The wording of s 117(2A)(d) of the Act is clear and refers to a failure to comply with previous orders of the Court. The Agreement was not an order of the Court and it was not until 14 November 2016 that I made orders allowing the Agreement to be enforced as if it were an order of the Court. Although in my view the substantive proceedings were not necessitated by the husband’s failure to comply with a previous order, the fact that the wife had to initiate proceedings in order to enforce the Agreement is in any event a matter to which the Court can and I propose to have regard pursuant to s 117(2A)(g) of the Act. The wife’s Application in a Case filed 15 February 2016 was similarly an application made by the wife to protect her interests pursuant to the Agreement.

3. It is also the case as submitted by the wife that there were proceedings which were necessitated by the husband’s failure to comply with orders made by the Court, subsequent to the wife filing her Initiating Application in which she sought to enforce the Agreement. This includes the wife’s Application in a Case filed 9 February 2016 in which she sought orders permitting her to proceed with her Initiating Application on an undefended basis.

4. Albeit I am not satisfied that the initiation of the proceedings was necessitated by a failure of the husband to comply with previous orders of the Court, the husband did not comply with orders made during those proceedings which necessitated the wife filing two further applications in a case for which she now seeks an order for costs.

Section 117(2A)(e) of the Act: Whether any party to the proceedings has been wholly unsuccessful in the proceedings;

1. Albeit the wife did not pursue all of the orders in her Initiating Application the wife submits and I accept that she was entirely successful in her application that the Agreement be enforced as if it were an order of the Court. The husband’s application, having been struck out, has been entirely unsuccessful in seeking to have the Agreement set aside and declared unenforceable.

2. In circumstances where the husband consented to an order in the terms sought by the wife in her Application in a Case filed 15 February 2016 the wife has similarly been wholly successful and the husband wholly unsuccessful with respect to that application.

Section 117(2A)(f) of the Act: 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;

1. Neither party made an offer to settle the proceedings.

Section 117(2A)(g) of the Act: Such other matters as the court considers relevant

1. The wife submits that the intervention of B Accountants on the husband’s behalf meant that the Court had to ensure the husband had been given additional notice and had an extra opportunity to respond. It is her case that this further delayed the proceedings and added to her costs.

2. On 21 October 2016 the matter was adjourned to 8 November 2016 to ensure that the orders made on 21 October 2016 and the written submissions of the wife in response to letters from B Accountants were sent to the husband. Despite the Court ensuring that the husband had every opportunity to respond and was satisfied that the husband was aware of the hearing on 8 November 2016, he did not appear nor was he represented on that date.

3. I am satisfied that the husband was given additional notice and extra time to respond, and that the need for the Court to exercise caution was a direct result of the way in which the husband has participated or more accurately failed to participate in these proceedings and the way in which he has conducted the proceedings is a matter to which I can have regard.  

4. The wife has also submitted that a failure to award costs would ultimately penalise her and reward the husband’s unacceptable behaviour.  In Stephens & Stephens (2010) 44 Fam LR 117 the Full Court said at [67] that “an order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages.” A decision to award or not award costs must be made having regard to s 117 of the Act.

5. That being said, I am satisfied in this case in circumstances where the parties entered into an Agreement, that Agreement has not been set aside, the husband has not complied with the terms of the Agreement, the wife has issued an application seeking enforcement of the Agreement and the husband has failed to comply with orders made by the Court and failed to participate in any meaningful sense in the proceedings, that there are circumstances that justify the Court departing from the general rule that each party should bear their own costs.

Indemnity Costs

1. There is no dispute that if costs are awarded despite the general rule that these costs be paid on a party/party basis the Court has the discretion in certain circumstances to make an order for the payment of costs on an indemnity basis. There is also no dispute that the Court “…should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind” (Kohan & Kohan (1993) FLC 92-340, page 79,614).

2. In Colgate–Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (“Colgate”) Sheppard J observed that there should be some “special or unusual feature in the case to justify the Court in departing from the ordinary practice”. His Honour, in summary, gave the following examples:

   ·the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;

   ·misconduct that causes loss of time to the Court and to other parties;

   ·proceedings commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;

   ·the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;

   ·an imprudent refusal of an offer to compromise; and

   ·an award of costs on an indemnity basis against a contemnor.

1. The wife has attached a copy of the costs agreement she entered into with her solicitors to her submissions. I have had regard to that agreement and the fact that the wife’s costs exceed the scale costs.  

2. The wife submits that the husband commenced an action that he “seemingly” never intended to prosecute and that he “clearly” believed he had no realistic chance of success. The wife submits that the husband’s behaviour was characteristic of an ulterior motive being pursued.

3. Although as previously referred to I am satisfied that the husband did not comply with orders made by the Court during the course of the proceedings or participate in a meaningful way in the proceedings prolonging and adding to the cost of proceedings, there is insufficient evidence for me to conclude that the husband never intended to prosecute his application to set aside the Agreement or that he “clearly” believed he had no realistic chance of success. Nor am I satisfied that the circumstances of this case are of such a “special or unusual” nature as to warrant a departure from the ordinary rule that costs be paid on a party/party basis.

Certification for Queen’s Counsel

1. The wife seeks certification pursuant to Rule 19.50 of the Family Law Rules 2004 (“the Rules”) that it was reasonable to engage Queen’s Counsel to argue her case on 5 October 2016 and 8 November 2016. The wife also seeks certification for her solicitor appearing as counsel at the mention on 21 October 2016.

2. The wife submits that the proceedings had some legal complexity and held high stakes as she was failing to meet mortgage repayments and the mortgagee had commenced enforcement proceedings against her.

3. The fact that the outcome of litigation may have significant ramifications for a party does not necessarily add to the complexity of the matter nor am I satisfied that this matter involved the degree of complexity the wife asserts or in those circumstances warranted the attendance of Queen’s Counsel.  I am however satisfied that when the matter was listed for mention on 21 October 2016 it would have been reasonable to brief counsel and in those circumstances I propose to certify for the wife’s solicitor appearing as counsel at the mention on 21 October 2016.

Conclusion

1. In all of the circumstances I propose to accede to the wife’s application that the husband pay her costs of and incidental to the Initiating Application filed 1 October 2015, the Husband’s Response to Initiating Application filed 5 November 2015 and the wife’s two Applications in a Case filed 9 February 2016 and 15 February 2016 arising out of the husband’s failure to comply with previous orders and or prosecute his case. Those costs are to be as agreed and in default of agreement, to be assessed on a party/party basis.

I certify that the preceding seventy two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 13 April 2017.

Associate: 

Date:  13 April 2017