Sofous and Cethenes and Ors (No 2)

[2012] FamCA 754

FAMILY COURT OF AUSTRALIA

SOFOUS & CETHENES AND ORS (NO. 2) [2012] FamCA 754

FAMILY LAW – COSTS – where orders made effecting property settlement between the applicant and first respondent – where the first, second and third respondents sought an order declaring that the first respondent’s interest in a property was held on trust for the second and third respondents – where it was ultimately found that the first respondent did not hold her interest in the property on trust – where the applicant made several genuine and reasonable attempts to resolve the proceedings – where the applicant seeks an order that the respondents pay his costs of and incidental to the proceedings – whether an order for costs should be made – where orders made requiring the first and second and third respondents to each pay a portion of the applicant’s costs.

Family Law Act 1975 (Cth)

Family Law Rules 2004 (Cth)

Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248
Latoudis v Casey (1990) 170 CLR 534
Lenova & Lenova (Costs) [2011] FamCAFC 141
McAlpin v McAlpin (1993) FLC 92-411
Fitzgerald (as child  representative for A (Legal Aid Commission of Tasmania)) v Fish & Anor (2005) 33 Fam LR 123
Penfold v Penfold (1980) 144 CLR 311
Yunghanns v Yunghanns (2000) FLC 93-029

APPLICANT: Mr Sofous

1^st RESPONDENT: Ms Cethenes

2^nd RESPONDENT: Mr Cethenes Senior

3^rd RESPONDENT: Ms Cethenes Senior

FILE NUMBER: SYC 3049 of 2009

DATE DELIVERED: 31 August 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Chambers

JUDGMENT OF: Murphy J

HEARING DATE: By way of written submissions filed on 24 April 2012 by the Applicant and 11 May 2012 by the Second and Third Respondents.

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Rosanna Tyler Solicitor

SOLICITOR FOR THE 1^ST RESPONDENT: S Kourkoulis & Associates

SOLICITOR FOR THE 2^ND & 3^RD RESPONDENTS: Barbayannis Lawyers

Orders

IT IS ORDERED THAT

1. Pursuant to s 117 of the Family Law Act 1975 (Cth):

   (a)The wife shall pay the husband’s costs of and incidental to these proceedings fixed in the sum of $5,000.00 to be paid to the trust account of the solicitors for the husband within seven (7) days of the date of this order.

   (b)The second and third respondents shall pay the husband’s costs of and incidental to these proceedings, fixed in the sum of $20,000.00 to be paid to the trust account of the solicitors for the husband within seven (7) days of the date of this order.

2. Interest at the rate prescribed from time to time in the Family Law Rules 2004 (Cth) shall be payable on any such amount not paid within the time frame prescribed in these orders.

IT IS NOTED that publication of this judgment under the Sofous & Cethenes and Ors (No.2)  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 BRISBANE

FILE NUMBER: SYC3049/2009

Mr Sofous

Applicant

And

Ms Cethenes

First Respondent

Mr Cethenes Senior

Second Respondent

Ms Cethenes Senior

Third Respondent

REASONS FOR JUDGMENT (COSTS)

1. On 29 March 2012 I made orders and delivered reasons in respect of an application for settlement of property. Those proceedings also involved the wife’s parents who pursued a claim that real property registered in the wife’s sole name was held on trust for the wife and her sister, subject to a life interest to them. Alternative claims were also made by them.

2. An email communication from my Associate dated 20 April 2012 confirmed that the husband’s application for costs had not been dismissed and was still live and pointed out that, in any event, the Family Law Rules 2004 (the “Rules”) provide for an application for costs being made consequent the making of final orders.

3. On 24 April 2012, written submissions were received on the part of the applicant husband in support of an order for costs. An affidavit was also filed on behalf of the husband on that date. On 11 May 2012 submissions were received on behalf of the second and third respondents resisting that application. No communication has been received from the wife. On 2 July 2012 a chambers order was made permitting any reply on the part of the applicant to be filed.

Costs and the Family Law Act

1. Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”):

   …expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s 117(2). As sub-s (1) is expressed to be subject to sub-s (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.

   (Penfold v Penfold (1980) 144 CLR 311 at 315).

2. The plurality in Penfold held (at 315 - 316):

   Sub-section (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 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. … Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs. (Citations omitted)

3. The Court is given the power to award costs upon a finding that “there are circumstances that justify it in doing so” (s 117(2)). The matters that might justify that central finding are at large (s 117(2A)(g)) but regard must be had to a number of specified matters (s 117(2A)(a)-(f)).

4. Section 117(2A) does not prescribe that more than one factor must be present or that any one factor has more or less weight than any other. The statutory factors are each and all matters which inform the overall discretion inherent within the section (see Fitzgerald (as child  representative for A (Legal Aid Commission of Tasmania)) v Fish & Anor (2005) 33 Fam LR 123).

5. The husband seeks an order for indemnity costs.

6. In outlining a number of examples where a Court might properly consider an award of indemnity costs, Sheppard J in Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248 gave as an example “…the making of allegations that ought never to have been made or the undue prolongation of the case by groundless contentions…” [citation omitted].

7. It is important to note, however, that the categories of cases giving rise to an indemnity costs order are not closed. See Yunghanns v Yunghanns (2000) FLC 93-029 at 87,471 where the Court said:

   …All that is required is that the Court asked to exercise the discretion be satisfied that some ‘particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis’… [citing Sheppard J].    

8. I am acutely aware that costs (including, in particular, indemnity costs) are not awarded as a punishment (Latoudis v Casey (1990) 170 CLR 534 at 543). Equally, however, conduct can be, and here plainly is, directly relevant to a consideration of indemnity costs.

9. Pursuant to my orders, the each of the parties is due to receive $5339.28 from an account held by a real estate agent. The written submissions on behalf of the husband accept that “the wife has limited income with which to meet an order for costs”, albeit noting that in some cases costs have been awarded where others have been expected to meet costs orders, citing McAlpin & McAlpin (1993) FLC 92-411.

10. The husband’s submissions refer to his costs being significantly greater than $5339.28 but the application is restricted to that amount by reference to the amount that she is to receive pursuant to the property settlement.

11. It should be recorded that a number of findings were made by me in the substantive proceedings in the light of “the inconsistencies in the accounts of each of the protagonists and how those accounts sit with the documentary and other evidence” (reasons [24]). So, too, I found that:

    54.It is important to observe that the confused and confusing picture thus presented is made no better by the generally unfavourable view I take of the evidence of each and all of the parties.

    55.In some cases, I consider that evidence is false and has been manufactured ex post facto so as to justify the result sought in these proceedings ... I have little doubt that the evidence of each of the parties is coloured by an understanding, however imperfect, that their answers have the potential to have legal consequences within these proceedings. Their evidence is, in my view, coloured by the desire to achieve particular outcomes by means of that evidence.

12. It should also be observed that the reasons make reference to a long-standing history of mental illness suffered by the wife which, at the time of trial was diagnosed as paranoid-schizophrenia. So, too, the husband has suffered from significant depression and I have found that it was not easy “to determine the extent that this impacted upon the husband’s veracity or reliability, but I have concerns about each”.

13. Ultimately, the contentions of the wife and the second and third respondents to the effect that there was a trust interest in respect of the C property was rejected. It can be said that their claims in that respect were “wholly unsuccessful” within the meaning of s 117(2A) of the Act.

14. On determination of that issue, the property of the parties comprised real property at C and real property at T having a total value of slightly more than $1 million. There was a mortgage to the Commonwealth Bank of about $50,000. The net pool of assets, including add-backs, was, as found by me, just over $1 million. Contributions were assessed by me in the proportion 60 per cent to the wife and 40 per cent to the husband and I adjusted that further in favour of the wife by 5 per cent. The overall entitlement of the wife was, then, 65 per cent of the net property.

15. That result permitted of orders, ultimately made, which saw the husband retain the T property and monies in trust together with superannuation, and the wife retaining the C property together with its mortgage, together with an add-back of legal fees and some cash.

16. The property of the parties or either of them flowing from the orders made by me, sees each of them, then, with modest assets and resources and with the evidence before me suggesting that the wife “will likely require some degree of ‘care’ for the rest of her life”. The husband was at the time of trial earning a modest income. He has though, in the past, suffered from depression. He receives rental income from the T property which he retains.

17. Whilst it is contended that the second and third respondents are “in receipt of income from paid employment and their rental property” and they are the registered owners of a piece of real property, their financial circumstances are, too, in my view, modest.

18. It is contended on behalf of the husband that the proceedings have been lengthened by the actions of the wife and the second and third respondents. I think it is plainly correct that the proceedings have been lengthened by reason of the actions or inactions of the wife. However, as I referred to in the substantive reasons, and in earlier reasons given by me, I consider that much of her recalcitrance is attributable to her illness.

19. Insofar as the second and third respondents are concerned, it is contended that their alternative claims and what I had to say about each in my reasons for judgment are also indicative of conduct that is relevant for the purposes of s 117(2A). Reference is also made to the fact that a Notice of Ceasing to Act was filed by their solicitors shortly prior to the mooted final hearing.

20. A judgment by Loughnan J refers to it not being possible for there to be a hearing where “…with the best will in the world, the third respondent conducts the hearing through an interpreter and without a lawyer.” (Sofous & Sofous [2010] FamCA 883 at [9]). So much was made manifest in the proceedings before me where interpreters were required during the course of the hearing for the second and third respondents. Reference is also made to my comments within the reasons that the wife was significantly influenced by her parents.

21. The affidavit of the husband filed 24 April 2012 refers to settlement offers made by him “…in an attempt to resolve these proceedings…”. Three offers were made by him on 17 June 2010, 27 August 2010 and 1 December 2011 respectively.

22. The first of those offers refers to the wife having “…chosen not to participate in these proceedings” and referring to the second and third respondents not standing “…in her shoes as their interests are in opposition to [the wife’s] interests.” An offer to compromise is made in those somewhat difficult circumstances “…to all three respondents as it is understood your clients are able to discuss it with the wife.”

23. Findings made by me in these proceedings indicate that it was a reasonable position for the husband to take that any settlement offer made to the second and third respondents might be seen to be one that could be discussed as between the second and third respondents and the wife, albeit I note that the relationship between them has been at times very patchy and I reiterate what I have said about the wife’s mental illness.

24. The offer made in that letter assumed a pool of about $1.4 million (C Property at $800,000 and T Property at about $600,000) and suggests that in the event that no trust interest was declared “…it will be just and equitable for the Court to divide the asset pool equally between the parties.” The offer contemplated each of the parties “…thus retain[ing] approximately $700,000 worth of assets.”

25. It is contended that the offer made 27 August 2010 “…offered to settle the proceedings with either all the respondents or in the event the wife chose not to continue to participate, with the second and third respondents, on essentially the same basis as provided by the orders made [by me], being that the wife keep the [C] Property and [the husband] keep the [T] Property.” In a letter sent by the husband’s solicitors, to the solicitors for the second and third respondents on 27 August 2010 responding to an offer to settle emanating there from, it is stated that “[t]this dispute cannot be settled without the participation of the wife” and that the husband did not have the capacity to speak on her behalf. An offer is then made “[i]n the event that the [wife] can obtain legal advice and chooses to participate…” That offer was expressed to “…remain open until 6 September 2010 at 9 am…” The letter “…reserves the right to tender this letter on an application for indemnity costs against the second and third respondents …” No values were attributed to either the C or the T properties in that letter.

26. On 1 December 2011, a further offer by the husband was forwarded in a letter dated 1 December 2011 to the solicitors for both the second and third respondents and the wife. That letter asserts the asset pool comprising “…primarily of the two properties and rental income.” It attributed values to those properties of C $710,000 and T $365,000 and a total net asset pool in the region of $1,073,201. The values attributed to the properties in that letter are those which are the same as those ultimately found by me in my reasons and the total net pool (albeit that there are some differences in the minor figures contained within it) was found by me to be very close to the figure contained in the letter of offer.

27. The offer made at that time is not directly comparable to the orders made by me because it proposes that the husband and wife “…recognise the second and third respondents’ contribution of $200,000 towards the C property, such contribution entitling them to an equitable share of the C property of 28% …” The offer goes on to provide that the balance of the pool be split equally between the husband and wife.

28. Whilst the offer is not comparable as between the husband and the wife, it accords to the second and third respondents an interest not ordered by me. However, it is important to understand that any such interest as could be offered needed the consent of the wife and there is no suggestion in the affidavit that the consent of the wife was forthcoming or might have been. Again, however, I reiterate her health and other issues including issues of conflict which she had had with her family over a considerable period of time.

29. The husband contends that he has incurred costs in the region of $67,000 since the making of the offer on 27 August 2010 (see Affidavit of Applicant filed 24 April 2012, at [32]).

30. Authorities suggest that genuine offers made in a bona fide attempt to resolve a matter are highly important in the exercise of the discretion. Of course, offers to settle are important in all jurisdictions. They can, however, be seen to be of considerable importance in a jurisdiction where the prima facie rule is that each party bear their own costs. In Lenova & Lenova (Costs) [2011] FamCAFC 141 the Full Court held:

    10.In this jurisdiction, costs do not “follow the event”; [s 117(1) is quoted]. As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation as a means of seeking to persuade the other party from pursuing litigation.

    11.A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.

    12.That consideration must, of course, be balanced against a litigant having limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order cannot be determinative; if it were, a party would always be able to please impercuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

31. It might also be said that it is frequently the case that considerable difficulties attend the making of costs orders that are designed to precisely accord will orders ultimately made by the court. Assertions and counter-assertions as to value are common. Often, as here, the interests of third parties intervene and must be accommodated. Frequently calculations and varying permutations are offered as a means of seeking to resolve a matter on a practical and sensible basis. In the exercise of the discretion inherent in s 117(2) it seems to me important to consider the nature, form and terms of all offers made and the extent to which they can be seen to be a genuine offer to settle, the reasonableness of which might be judged ultimately by reference to the nature and form of the orders made by the court.

32. Here, it seems to me that the thrust of the orders suggested in the offers made on behalf of the husband were to the effect that each of the parties retained the real property with which they were, as it were, most associated. That in fact is the thrust of the orders made ultimately by me. The precise terms of the offers might not necessarily accord with those ultimately made by me, but the offer looked at as a whole can in my view, be seen to be a genuine and reasonable attempt on the part of the husband to resolve the proceedings without the necessity for a trial.

1. I consider those offers to be an important matter that ought be taken into account and given real weight in the exercise of the discretion in this case.

2. I am persuaded that the circumstances of this case, including the findings made by me within the substantive reasons to which I have earlier referred, justify a departure from s 117(1) of the Act. I am satisfied that an order for costs should be made in favour of the husband.

3. It does not in my view follow that because I have attached considerable importance to the offers made in writing by the parties, that an order for costs should be made either as and from the date of one or more of the offers, or in an amount equivalent to the costs incurred by the husband as and from the date of any particular offer.

4. The discretion in respect of costs remains at large and ought be exercised by reference to all of the circumstances of the case. In this particular case those circumstances include parlous health and financial circumstances on the part of the wife and modest financial circumstances on the part of the second and third respondents. In saying that I also take account of the fact that the financial circumstances of the husband are also modest.

5. The circumstances do not justify a departure from “the normal rule” that costs should be awarded on a party and party basis. No circumstances to which the submissions on behalf of the husband are directed persuades me that costs should be paid on an indemnity basis.

6. Balancing all of the relevant considerations, I consider it appropriate, in all the circumstances of this case, to fix the amount of the costs and those respondents to this application by whom they should be paid.

7. In my judgment, it is appropriate for the wife to pay costs fixed in the sum of $5,000.00 and for the second and third respondents to pay costs to the husband fixed in the sum of $20,000.00.

8. I will order accordingly.

I certify that the preceding forty three (43) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy delivered on 31 August 2012.

Associate: 

Date:  31 August 2012