Southern & Southern
[2022] FedCFamC1F 1045
Federal Circuit and Family Court of Australia
(DIVISION 1)
Southern & Southern [2022] FedCFamC1F 1045
File number(s): LEC 629 of 2011 Judgment of: HOGAN J Date of judgment: 21 December 2022 Catchwords: FAMILY LAW – COSTS – Where the Court is persuaded that the circumstances justify the making of an order for costs but is not persuaded that it is just to make an order for costs on an indemnity basis – Where costs are ordered in a fixed amount. Legislation: Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
D & D Costs (No. 2) (2010) FLC 93-435; [2010] FamCAFC 64
In the Marriage of Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2008) 38 Fam LR 478; [2007] FamCA 1178
Yunghanns v Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: First Instance Number of paragraphs: 37 Date of hearing: Determined in Chambers following the receipt of written submissions Place: Brisbane Solicitor for the Applicant: Barry.Nilsson Lawyers by way of written submissions filled 24 October 2022 Counsel for the First Respondent: Mr Balzamo by way of written submissions filed 3 January 2020 and by way of written submissions in reply filed 17 November 2022 Solicitor for the First Respondent: Hannigans Lawyers and then Pennisi Zia Lawyers from 23 September 2022 Solicitor for the Second Respondent: Juratowitch & Kite Solicitor for the Third Respondent: Gilchrist Connell Solicitor for the Fourth Respondent: Hannigans Lawyers and then Pennisi Zia Lawyers from 12 December 2022 Solicitor for the Interveners: O’Neill Family Law by way of written submissions filed 24 October 2022 ORDERS
LEC 629 of 2011 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR SOUTHERN
Applicant
AND: MS SOUTHERN
First Respondent
B & C (AS TRUSTEES IN BANKRUPTCY)
Second Respondent
J LAW FIRM (and another named in the Schedule)
Third Respondent
MR F SOUTHERN
First Intervener
MS G SOUTHERN
Second Intervener
order made by:
HOGAN J
DATE OF ORDER:
21 december 2022
THE COURT ORDERS THAT:
1.The Applicant pay the First Respondent’s costs of and incidental to the proceedings by which he sought an order setting aside the Binding Financial Agreement into which he and the First Respondent had entered on 23 August 2010, with such costs to be fixed in the amount of $40,000 and the interest accrued on that amount since its deposit into trust following the making of the order for security for costs on 25 January 2016.
2.The amount currently held by Hannigan’s Lawyers, Solicitors and Attorneys on trust pursuant to an order for security for costs made on 25 January 2016 (being the amount of $40,000 and any interest which has subsequently accrued on the same), be paid forthwith to or at the direction of the First Respondent in satisfaction of the amount owing to her by the Applicant pursuant to Order 1.
3.Save as provided above, the First Respondent’s application for an order that the Applicant and/or the Intervenors pay her costs of and incidental to the Applicant’s proceedings for an order setting aside the Binding Financial Agreement into which the Applicant and the First Respondent entered on 23 August 2010 is dismissed.
4.The Intervenors’ application, as outlined in the written submission filed 24 October 2022, for an order that the First Respondent pay their costs of and incidental to them responding to her application for an order for costs is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Southern & Southern has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HOGAN J
On 6 December 2019, I made an order dismissing the Applicant’s application for an order setting aside a Binding Financial Agreement into which he and the First Respondent had entered on 23 August 2010 (“the Binding Financial Agreement”). I did so for the reasons expressed in the Reasons for Judgment delivered that day.
The order dismissing the Applicant’s proceedings for an order setting the Binding Financial Agreement aside was made following the First Respondent’s application for the same; it was opposed by both the Applicant and the Intervenors.
The First Respondent seeks an order that the Applicant and the Intervenors (his parents) jointly and severally or, alternatively, the Applicant alone, pay her costs of and incidental to the proceedings which were, it seems, relevantly instituted by an Amended Initiating Application filed on 29 May 2015 by which the Applicant first sought an order setting the Binding Financial Agreement aside.
The Applicant and the Intervenors oppose the making of any order requiring each of them to pay any of the First Respondent’s costs.
As has been the case throughout these proceedings, the Second Respondent (the Applicant’s former trustee in bankruptcy) has taken no part in this aspect of the proceedings.
Whilst the First Respondent complied substantially with the requirement that she file submissions in support of her application for an order for costs,[1] the resolution of her application has been delayed by the Applicant’s appeal against the 6 December 2019 order (which was subsequently abandoned) and the failure of any of the parties to take any steps thereafter to return the matter to court.
[1]By filing a document entitled “Written Submissions for the First Respondent pursuant to Orders made 6 December 2019” and, subsequently, filing a document entitled “Written Submissions in Reply for the First Respondent pursuant to Orders made 6 December 2019”.
The Applicant and the Intervenors have now each filed written submissions outlining the bases on which they each oppose orders being made in the terms sought by the First Respondent. The Applicant’s position[2] is that the Court would not be persuaded to make any order for costs or, alternatively, would reserve the same pending what was described as the “final determination of the matter”; the Intervenors sought the dismissal of the First Respondent’s application for costs against them and that the Court would make an order requiring the First Respondent to pay their costs of responding to the same in an amount fixed by the Court.[3]
[2]As outlined in the document entitled “Submissions regarding costs on behalf of the Applicant” filed on 24 October 2022.
[3] As outlined in the document entitled “Written Submissions of the Intervenors” filed 24 October 2022.
The reference made by the Applicant to the “final determination of the matter” may be seen as a reference to the outstanding proceedings, substantially between the Intervenors, the Applicant, the First Respondent and the Third and Fourth Respondents, in which the Intervenors seek relief under the Corporations Act 2001 (Cth). As noted at one of the procedural hearings which occurred as a prelude to the outstanding matter being listed for trial on 20 to 22 February 2023 inclusively, the Intervenors are able to prosecute their application in this Court because of its original jurisdiction under that Act.
I am not persuaded that it is necessary or appropriate to make an order reserving the costs until the remaining proceedings are completed. Instead, I consider that the most appropriate, proper and just course is that I proceed to determine the First Respondent’s application for the orders as to costs that she seeks against the Applicant and the Intervenors.
Discussion of applicable legislation and principles
Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to proceedings under the Act shall bear his or her own costs. However, if the Court is satisfied there are circumstances which justify it, the Court may make such order as to costs as it considers just.[4] In considering what order, if any, as to costs should be made, the Court must have regard to the matters set out in s 117(2A) of the Act.
[4]Family Law Act 1975 (Cth) s 117(1).
In arriving at the conclusions expressed in these Reasons I have had regard to the written submissions filed on behalf of each of the First Respondent, the Applicant and the Intervenors.
The submissions made on behalf of the First Respondent included that:
(a)the Court would be persuaded that the circumstances justify the making of an order for costs; and
(b)such order for costs should be made on the indemnity basis (or, alternatively on the party and party basis); and
(c)irrespective of the basis on which the costs are to be assessed, the Court should fix the costs in the amount of $172,484.54; and
(d)the Court would make orders for:
(i)the release of $40,000 (together with any interest which has accrued on that sum, which has been held in the trust account of Hannigan’s Lawyers following the making of an order for security for costs in that amount on 25 January 2016; and
(ii)the application of the same toward meeting whatever costs might be ordered in the First Respondent’s favour.
It was submitted on behalf of the First Respondent that the Court would be persuaded that circumstances justify an order for costs being made because:
(a)the First Respondent had been put to unnecessary expense of legal costs throughout the entirety of the litigation as a consequence of the conduct of the Applicant and the Intervenors; and
(b)the Applicant had been wholly unsuccessful in his application for an order to set aside the Binding Financial Agreement; and
(c)the Applicant’s case to set aside the Binding Financial Agreement was wholly without merit and had no prospects of succeeding from the outset; and
(d)the Applicant had commenced the proceedings during the currency of his bankruptcy and ought to have realised, from the outset, that his estate in bankruptcy should have been the party to bring the action and would otherwise be the beneficiary of any decision made by the Court in his favour; and
(e)as a consequence of the Applicant’s material being prolix and voluminous, she had incurred considerable costs obtaining advice from solicitors and counsel about its content and responding to the same.
The First Respondent’s submissions were, in essence, that the Applicant’s proceeding for an order setting aside the Binding Financial Agreement was always doomed to fail and that any properly advised person standing in his shoes ought to have understood this.
The First Respondent submitted, insofar as the Intervenors are concerned, that their participation in, and conduct during, the proceedings was “equally responsible” for the costs she incurred and, consequently, the Court would be persuaded that the circumstances justify making an order that they pay her costs as sought.
The submissions made on behalf of the Applicant to resist an order for costs being made were set out in the submissions filed on his behalf; they included that the Court would not be persuaded that circumstances justify the making of an order as to costs because the inherent complexity of the proceedings and the parties’ respective financial circumstances weigh against the same. In addition, it was submitted that: an adverse costs order would render the Applicant (who, it was submitted, had spent $6,230.95 more recently on his legal costs) unable to fund his legal representation in the upcoming trial listed in February 2023; and, that the Court would be persuaded, from the fact that the First Respondent had been able to pay about $7,000 toward her legal costs in the period from 23 September 2022 to 20 October 2022, that she was able to access funds to meet her legal costs. Even if the latter was the case, the fact that a party is able to fund their own legal representation (a matter which is contested in this case) does not, of itself, mitigate against the making of an order that another party pay that party’s costs.
Whilst it was also submitted on behalf of the Applicant that an order as to costs would cause him significant hardship, the absence of current evidence of his financial circumstances makes a proper assessment of the weight to be accorded to this submission difficult. Further, well-known authority clearly establishes that impecuniosity on the part of a party opposing the making of an order for costs is, of itself, no bar to an order for costs being made where it is otherwise warranted.[5]
[5] See, for example, D & D (Costs) (No 2) (2010) FLC 93-435.
The submissions filed on behalf of the Applicant also emphasised, it seemed to me, that if the Court was persuaded that the circumstances justify the making of an order as to costs, the Court would not be persuaded that it is just to fix the same in the amount sought by the First Respondent – particularly on the basis of the evidence relied on by the First Respondent. It was submitted on behalf of the Applicant that, if the Court was persuaded that circumstances justify the making of an order as to costs and that it was just to make an order that the Applicant pay the First Respondent’s costs, the amount ordered to be paid should be no more than $14,880.45 and an order should be made to stay the obligation of the Applicant to pay the same pending the finalisation of the proceedings listed for trial in February 2023.
Whilst the Applicant’s submissions suggested that the stay advocated for should be put in place “pending the final determination of the division of assets pursuant to section 90SM of the Act”, it seems to me that the dismissal of the Applicant’s proceedings seeking an order setting the Binding Financial Agreement aside means that there will not be any “division” as between the Applicant and First Respondent of assets by order made under the Act.
The submissions made on behalf of the Intervenors in resisting an order as to costs were as contained in the written submissions filed on their behalf. These included that the Court would not be persuaded by what were described as the “sweeping” submissions made by counsel for the First Respondent given the evidence before the Court; it was submitted, in essence, that any of the actions taken by the Intervenors did not add to the costs incurred by the First Respondent: for example, submissions filed by the Intervenors were filed at the same time as those filed by the Applicant and, thus, did not add to the First Respondent’s costs.
As mentioned elsewhere, there is no current evidence before the Court about the relevant parties’ current financial circumstances. However, given:
(a)the duration of the litigation; and
(b)that, speaking broadly, the Intervenors appear to have been seeking orders for the payment to them of funds that they provided to assist the Applicant and the First Respondent many years ago; and
(c)that there have been periods of time during the course of this litigation during which at least some of the parties to it have been self-represented,
it seems to me to be more likely that neither the Applicant nor the First Respondent are likely to be in a particularly strong financial position.
All of the parties who appeared on 7 February 2019 and 7 March 2019 to be heard in relation to the First Respondent’s application for an order dismissing the Applicant’s application to set aside the Binding Financial Agreement were legally represented – none were legally aided.
It is, I think, clear that the Applicant was the primary force in seeking an order that the Binding Financial Agreement be set aside. By way of broad summary, his case involved his assertion that, in entering into the Binding Financial Agreement, he and the First Respondent committed a fraud in that they entered into the same for the purpose of defeating creditors; he sought to have the Binding Financial Agreement set aside on the basis of his admitted fraud. The First Respondent did not accept the contention that she had been a party to a fraud; her case, in essence, was that she and the Applicant had entered into the Binding Financial Agreement to finalise their separation.
Whilst the submissions filed on behalf of the First Respondent advanced that the Intervenors had joined the Applicant’s proceedings for an order setting aside the Binding Financial Agreement because of the relief they sought in the Response filed by them on 25 October 2016, it appeared accepted that they abandoned this relief when they filed a Further Amended Response on 19 December 2018.
Consequently, as I noted in the Reasons for Judgment delivered on 6 December 2019, the only “live” application by which an order setting aside the Binding Financial Agreement was sought at the time I heard the First Respondent’s application to dismiss the Applicant’s proceedings was that filed by the Applicant.
Whilst the Intervenors subsequently formally renewed their support of the Applicant’s primary relief by filing a Second Further Amended Response on 18 April 2019, by which the relief they sought included that an order be made to set the Binding Financial Agreement aside, this was not their formal position when the application to dismiss the Applicant’s proceedings was heard. Despite this, the Intervenors joined with the Applicant in submitting that the First Respondent’s application to dismiss the Applicant’s proceedings should be dismissed.
Clearly, both the Applicant and the Intervenors were wholly unsuccessful in their opposition to an order being made to dismiss the Applicant’s proceedings. The Applicant was wholly unsuccessful in prosecuting his application for an order setting the Binding Financial Agreement aside.
The First Respondent was wholly successful on her application for an order dismissing the Applicant’s proceedings to set aside the Binding Financial Agreement; she was wholly successful in her opposition to an order being made to set the Binding Financial Agreement aside. Such success though is not, of itself, necessarily productive of an order for costs: otherwise there may be an inappropriate distraction from the proper consideration of all of the other matters particularised in s 117(2A) of the Act – those being matters to which the Court must give consideration in determining whether the circumstances in any case are such as to justify the making of an order that one party pay another’s costs.
Strident submissions were made on behalf of the First Respondent to the effect that the manner in which both the Applicant and the Intervenors conducted the proceedings to date contributed significantly to the First Respondent’s costs. However, it seems to me that all of the parties who have participated in these proceedings have contributed to what appears to have been the confusion which has attended them – there have been numerous iterations of the formal documents filed on behalf of all of the parties who have actively participated in the proceedings, which action has, of itself, contributed to the costs and delay which has attended the finalisation of the proceedings under the Act.
As I noted in the Reasons for Judgment delivered on 6 December 2019, the issue of the ability of a bankrupt (as the Applicant had been) to seek an order pursuant to s 90K of the Act had not been directly considered prior to then. All that previous authority had determined was that the right to bring an application for property settlement orders pursuant to s 79 or s 79A of the Act was a personal right which did not vest in a bankrupt’s trustee in bankruptcy but remained with the bankrupt. Whilst the submission that the right afforded by s 90K of the Act should be regarded in the same way as the right provided by s 79 and s 79A of the Act was ultimately unsuccessful, the absence of any authority (let alone any binding authority) contrary to the position advanced by the Applicant and supported by the Intervenors is, I think, a relevant consideration in the determination of whether the circumstances justify the making of an order that the Applicant and/or Intervenors pay the First Respondent’s costs of and incidental to the proceedings; it is also, in my view, particularly relevant to the determination of the basis upon which any costs ordered to be paid should be calculated and/or assessed.
Having considered the contents of the written submissions provided on behalf of the First Respondent, the Applicant and the Intervenors, I am persuaded, in the broad exercise of discretion accorded to the Court in determining applications for costs, that the circumstances here justify the making of an order that the Applicant pay the First Respondent’s costs. In arriving at this conclusion I have placed particular weight on the fact that the Applicant has been wholly unsuccessful in prosecuting the application by which he sought the Court make an order setting aside the Binding Financial Agreement because, on his case, it had been entered into for the purpose of defeating creditors.
Despite my conclusion that the circumstances justify the making of an order that the Applicant pay the First Respondent’s costs of the proceedings, I am not persuaded that the circumstances here are exceptional[6] or as such as to justify the making of an order that the same be paid on an indemnity basis. I have arrived at this conclusion despite the submissions advanced on behalf of the First Respondent; my conclusion that the circumstances here are not exceptional or extreme or such as to warrant departing from “the usual course” of ordering the payment of costs on the party and party basis to order that costs be paid on an indemnity basis (something which, as has been said in well-known authority, is a “very great departure” from the “normal standard” in this and other jurisdictions[7]) is significantly influenced by the fact that, at the time the application was heard, there was no authority about the issue, outlined in paragraph 30 above, which provided the basis for the ultimate dismissal of the proceedings.
[6]Yunghanns v Yunghanns (2000) FLC 93-029; In the Marriage of Kohan (1993) FLC 92-340; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J.
[7]D & D Costs (No. 2) (2010) FLC 93-435; Limousin v Limousin (Costs) (2008) 38 Fam LR 478; In theMarriage of Kohan (1993) FLC 92-340; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 per Sheppard J.
In addition, despite being persuaded that the circumstances justify the making of an order that the Applicant pay the First Respondent’s costs associated with the proceeding, I am not persuaded that it is just to make an order that the Applicant pay the entirety of the First Respondent’s costs of and incidental to the entirety of the proceedings by which he sought an order that the Binding Financial Agreement be set aside.
Instead, noting, in particular, the matters set out in paragraph 30, that an order was made on 25 January 2016 for the payment into trust of $40,000 by way of security for costs, I consider that the orders that are just in the circumstances of this case are orders that:
(a)quantify the costs payable by the Applicant to the First Respondent in the sum of $40,000 (together with the interest incurred on that amount since it was deposited into trust); and
(b)facilitate the payment out to the First Respondent of the entirety of the funds held in trust, consequent upon the order for security for costs having been made on 25 January 2016, in satisfaction of the order that the Applicant pay the First Respondent’s costs in that sum.
By fixing the costs payable by the Applicant to the First Respondent in this way, the parties will be relieved of what I regard as what would be, absent such an order, the inevitable burden of engaging in the assessment process; in determining the amount as I have, I have taken into account those aspects of the First Respondent’s submissions which address the manner in which the Court should approach the fixing of costs.
I am not persuaded that circumstances justify the making of an order that the Intervenors pay the First Respondent’s costs of and incidental to the proceeding in which the Applicant sought an order that the Binding Financial Agreement be set aside. I have arrived at this determination predominantly because, at the time the First Respondent’s application was heard, the Intervenors did not seek an order that the Binding Financial Agreement be set aside; in addition, I am unpersuaded that the degree to which they supported the Applicant’s position contributed in any significant way to the costs incurred by the First Respondent.
The Intervenors sought an order that the First Respondent pay their costs of responding to her application for costs. I am not persuaded that circumstances of this case justify the making of an order to that effect. In arriving at this conclusion, I have taken into account that the Intervenors unsuccessfully supported the Applicant’s position that the First Respondent’s application to dismiss the proceedings be dismissed and that they were wholly unsuccessful in that respect: given this, I consider the First Respondent’s application that they be ordered to contribute to her costs to be understandable and certainly not an application that could, in any way, be regarded as being inevitably doomed to fail.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hogan. Associate:
Dated: 21 December 2022
SCHEDULE OF PARTIES
LEC 629 of 2011 Respondents
Fourth Respondent:
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