Spalla & Spalla
[2022] FedCFamC2F 551
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Spalla & Spalla [2022] FedCFamC2F 551
File number(s): CAC 872 of 2020 Judgment of: JUDGE W J NEVILLE Date of judgment: 2 May 2022 Catchwords: FAMILY LAW – Property – security for costs – where the Husband unexpectedly raised claims of alleged fraud relating to a settlement Deed at the end of the final hearing in September 2021 – points of claim not provided until the end of January 2022 – despite numerous attempts by the Wife, full particulars of the claim have still not been provided – Wife filed application seeking points of claim be struck out and in the alternative, further particulars and security for costs – at the interim hearing in April 2022, the scope of the wide ranging fraud claim was narrowed and now relates only to date of separation in the recitals of the Deed – issue of the date of separation is likely to be no more than an issue of evidence – further 2 day final hearing required to determine any alleged fraud claims and finish the substantive evidence – security for costs ordered in sum of $20,000 to be paid within 60 days – proceedings stayed until the payment of security – parties to advise within 14 days where security will be held – Wife’s costs of Application reserved. Legislation: Family Law Act1975 (Cth) s.117(2) & (2A)
Federal Circuit and Family Court of Australia Rules 2021 (Cth), Part 12.2, r.12.02 & 12.03
Cases cited: Evans v Rochford (2003) 30 Fam LR 336
In the Marriage of Luadaka (1998) 24 Fam LR 340
Stephens v Stephens (2011) 44 Fam LR 117
G.E. Dal Pont, The Law of Costs (Fifth Edition) (Sydney: LexisNexis Australia, 2021)
Division: Division 2 Family Law Number of paragraphs: 40 Date of hearing: 1 April 2022 Place: Canberra Counsel for the Applicant Ms Winfield Solicitor for the Applicant Zali Burrows Lawyers Counsel for the Respondent Mr Masters Solicitor for the Respondent Marjason & Marjason Solicitors ORDERS
CAC 872 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS SPALLA
ApplicantAND: MR SPALLA
Respondent
order made by:
JUDGE W J NEVILLE
DATE OF ORDER:
2 May 2022
UNTIL FURTHER ORDER, THE COURT ORDERS THAT:
1.By 12:00pm on 30 June 2022, the Husband is to pay to the Wife’s lawyers the sum of $20,000 as security for costs.
2.The proceedings be stayed until payment of the security pursuant to Order 1 is made.
3.Within 14 days of the date of these Orders, being by 16 May 2022, the parties’ lawyers are to finalise and advise the Court where the security will be kept.
4.Within 21 days of the date of these Orders, being by 23 May 2022, the Husband is to provide further and better particulars to the Wife regarding the claim of fraud. Copies of those particulars are to be filed with the Court within 7 days of being provided to the Wife.
5.The Wife’s costs of and incidental to the Amended Application in a Proceeding filed 9 February 2022 be reserved.
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 a pseudonym Spalla & Spalla has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE W J NEVILLE
Introduction
This property matter was heard, on a final basis, in September 2021. The hearing of the evidence was all but concluded when a certain document emerged in cross examination of the parties’ adult daughter (Ms D) that caused the Applicant Husband some consternation. It was thought that the document – a letter of advice regarding a settlement Deed (“the Deed”) from 2014 – had previously been disclosed. In any event, shortly after this event at the end of the hearing, which may, at its highest, be described as a procedural hiccup, the Husband’s Counsel at the hearing, who was not the same Counsel who appeared for the Husband at the interim hearing for this Application, sought a brief adjournment, which was granted, to consider his client’s position.
Upon the hearing resuming, Counsel confirmed the Husband’s intention to argue his case with a new claim of alleged fraud regarding the Deed, both in relation to its preparation, construction, and signing, and in relation to one specific fact set out in the Recitals to it, namely the date of separation of the parties. The wide-ranging claims of fraud continued for quite a few months before, more recently, the claim now being confined primarily to a focus upon the accuracy of the date of separation of the parties set out in one of the Recitals. However, I confess to remaining somewhat unsure about whether any other, or related, claim for fraud is being pressed regarding, for example, the execution of the Deed, including what advice was provided to the Husband prior to its execution. It would seem not given the Father’s lawyer’s confirmation of now being specifically confined as indicated.
For the reasons that follow, there should be an Order made requiring the Husband to provide security for costs, albeit of a more modest amount than as sought by the Wife. Essentially, that award should be for costs reasonably incurred, for the period immediately from (a) after the end of the trial in September 2021 when the Husband confirmed his intention to plead a claim of fraud, which was then more widely drawn, until (b) 31st July 2022, which is shortly before the future listing for the resumed final hearing.
As a statement of fact, which is supported by numerous pieces of correspondence with the Court and multiple documents filed more recently, largely, if not almost exclusively, it is the Husband’s claim of fraud that has led to multiple directions hearings, as well as attempted interlocutory hearings, since September 2021. Requests for particulars regarding the allegation of fraud have been numerous also. Even now, it is unclear whether sufficient particulars, regarding facts and law, have been relevantly provided notwithstanding multiple requests. Put another way: “but for” the late-breaking allegation of fraud at the very end of the final hearing, the trial would now be concluded, even if the conclusion was achieved procedurally by the parties filing written submissions after the conclusion of the evidence at the hearing last September.
Noting the considerations set out in s.117 of the Family Law Act 1975 (Cth) (“the Act”), and Part 12.2 of the Federal Circuit and Family Court Rules 2021 (Cth) (“the Rules”), the amount of security to be provided by the Husband shall be $20,000.00. This amount is to be provided within 60 days, noting that the resumed final hearing is to commence in late August 2022.
Applicant’s Orders sought
The Orders sought by the Applicant Wife (Respondent in the substantive proceedings), which canvassed much more than an Order for security for costs, were contained in the Amended Application in a Proceeding, filed 9th February 2022; they were as follows. It will be immediately clear that this was a strike-out Application of the Husband’s Points of Claim, as well as a further attempt to obtain particulars regarding the fraud claim, and to seek an Order for security for costs, all in the alternative (emphasis in original; some grammatical corrections only have been made by the Court):[1]
[1] Paragraphs 3 and 4 seeking particulars appear to be duplicates of each other.
1.Within 14 days, the Applicant provide further and better particulars of the allegation of fraud made 10 September 2021 and repeated in letter dated 18 October 2021, such request for further and better particulars having been sought by letter dated 28 October 2021 in respect of letter dated 18 October 2021.
1A.The Points of Claim filed and served by the Applicant on 31 January 2022 be struck out.
Particulars
(a) The Points of Claim do not specify any relief sought.
(b) The Points of Claim fail to disclose a cause of action.
(c)The Points of Claim do not disclose a cause of action or any remedy sought relevant to the parties to the Family Law proceedings.
(d)To the extent the Points of Claim allege “criminal conspiracy”, they do not plead any relevant legislation.
(e)To the extent the Points of Claim allege “criminal conspiracy”, they do not disclose any offence or unlawful act in respect of which it is alleged the parties conspired.
(f)“an agreement designed to limit, or otherwise minimise the capacity of [Insurer E] to seek and recover the amount contained in the judgment” is not an offence recognised by the Crimes Act 1900 (NSW) nor by the Criminal Code Act 2002 (ACT) nor by the Criminal Code Act 1995 (Cth).
1B. In the event, the Points of Claim are not struck out:
(a)the Respondent serve a request for further and better particulars of the Points of Claim within 7 days;
(b)the Applicant answer the request for further and better particulars within 7 days of receipt of the request.
1C. In the event, the Points of Claim are not struck out, pursuant to Family Law Rules 2004 rule 19.05, order that the Applicant give security for costs in respect of the Applicant’s case in the sum of $44000.
Particulars
(a) Applicant’s financial statement dated 26 August 2021;
(b) Allegation of fraud made during hearing 10 September 2021;
(c)Letter Marjason and Marjason, solicitors to Zali Burrows alleging fraud dated 18 October 2021;
(d) Points of claim filed and served 31 January 2021
2.Request for further and better particulars of the allegation contained in letter of 18 October 2021. In respect of paragraphs 1 and 2, does the narrative in those paragraphs allege a fraud? If so:
(a)does the Applicant allege this “fraud” was civil or criminal;
(b)what are the facts and circumstances the Applicant alleges amount to deception or dishonesty;
(c)who is it alleged acted deceptively or dishonestly;
(d)is it alleged someone benefited financially;
(e)if someone benefited financially, who and for how much;
(f)who suffered is it alleged a detriment as a result of the alleged behaviour;
(g) was the Applicant present at any relevant conversations; If so:
(i) when did they occur;
(ii) where did they occur;
(iii) who was present;
(iv) what was the substance and effect of any such conversations;
(h)in what way could this benefit be relevant to a matrimonial cause;
(i)in what way could the alleged detriment be relevant to a matrimonial cause;
(j)do any documents exist and if so, please provide a copy or advise where it or they may be inspected.
3.With respect to paragraph 3, does the narrative in that paragraph allege a fraud? If so:
(a)does the Applicant allege this “fraud” was civil or criminal;
(b)what are the facts and circumstances the Applicant alleges amount to deception or dishonesty;
(c)who is it alleged acted deceptively or dishonestly;
(d)is it alleged someone benefited financially;
(e)If someone benefited financially, who and for how much?
(f)who is it alleged suffered a detriment as a result of the alleged behaviour;
(g)was the Applicant present at any relevant conversations; If so:
(i) when did they occur;
(ii) where did they occur;
(iii) who was present;
(iv) what was the substance and effect of any such conversations;
(h)in what way could this benefit be relevant to a matrimonial cause;
(i)in what way could the alleged detriment be relevant to a matrimonial cause;
(j)do any documents exist and if so, please provide a copy or advise where it or they may be inspected.
4.With respect to paragraph 3, does the narrative in that paragraph allege a fraud? If so:
(a)does the Applicant allege this “fraud” was civil or criminal;
(b)what are the facts and circumstances the Applicant alleges amount to deception or dishonesty;
(c)who is it alleged acted deceptively or dishonestly;
(d)is it alleged someone benefited financially;
(e)If someone benefited financially, who and for how much?
(f)who is it alleged suffered a detriment as a result of the alleged behaviour;
(g)was the Applicant present at any relevant conversations; If so:
(i) when did they occur;
(ii) where did they occur;
(iii) who was present;
(iv) what was the substance and effect of any such conversations;
(h)in what way could this benefit be relevant to a matrimonial cause;
(i)in what way could the alleged detriment be relevant to a matrimonial cause;
(j)do any documents exist and if so, please provide a copy or advise where it or they may be inspected.
4.The Applicant pay the Respondents’ costs of and incidental to this application.
5.Such further or other orders as this Honourable Court deems fit.
For current purposes, the only focus of these reasons is the Wife’s Application that seeks an Order for security for costs. As earlier noted, that part of her Application arises from, or relates to, the Husband’s Application that alleges certain, but now apparently circumscribed, fraudulent conduct (by all members of the family, including the Husband) in the formulation, execution of, and certain facts contained in, the Deed, dated 14th January 2014. At this juncture, in my view it is sufficient to focus only on the security for costs (and particulars) aspect of the Application rather than deal with the Wife’s strike-out Application.
As also earlier recorded, the Husband’s claim in relation to fraud, as it currently appears, is now confined to the Husband’s execution of the Deed, and the recital in it that confirms (on its face) the date of separation of the parties. The Husband says that the date of separation in the Deed is incorrect and that, in fact, the date of separation of the parties was in 2019 and not in 2013.
Respondent’s Orders sought
The Respondent Father’s Orders sought were contained in the Outline of Submissions filed 1st April 2022; they were as follows (emphasis in original):
1.The Deed be set aside in so far as it pertains to the separation of the parties.
2.The orders sought in the Respondent’s Amended Application dated 9 February 2022 be dismissed.
Written submissions on behalf of the Applicant
The Applicant’s submission were contained in the document titled ‘Outline of Contentions’ emailed to Chambers on 29th March 2022; they were as follows (emphasis in original; earlier parts listing documents of one kind or another are excluded):
PART C: ISSUES IN DISPUTE INAPPLICATION IN A PROCEEDING
1.Strike out pleading / summary dismissal pursuant to FCFCOA (Family Law) Rules 2021 Rule 10.09;
2.Security for costs pursuant to Part 12.2
3.Applicant provide particulars
PART D: OUTLINE OF CONTENTIONS
Strike out application
1.The Respondent asks the Court to strike out the Applicant’s Points of Claim filed 31 January 2022 and Amended Points of Claim filed 24 March 2022 pursuant to FCFCOA (Family Law) Rules 10.09.
2.Relevant events occurred in New South Wales. Uniform Civil Procedure Rules 2005 Reg 15.3 is as follows:
15.3Allegations of behaviour in the nature of fraud. A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies.
3.In addition to the Points of Claim and Amended Points of Claim the Applicant has provided particulars on two occasions:
a.Letter Marjason to Zali Burrows dated 18 October 2021 (Zali Burrows sworn 16 December 2021 para 1, annexure A);
b.Letter Marjason to Zali Burrows dated 5 November 2021 (Zali Burrows sworn 16 December 2021 para 3, annexure C).
None of the documents identifies a fraud, let alone a criminal conspiracy.
4.On 16 March 2022, the Applicant agreed to confine the claim for fraud to recitals in deed ([Ms D] 19 October 2020 para 45 annexure D) relating to date of end of relationship. The Deed is dated 31 January 2014.
The only relevant recital reads:
“II. [Mr Spalla] and [Ms Spalla] are married but separated.”
This is a matter of evidence and does not amount to fraud or criminal conspiracy. It does not require the Deed to be set aside.
5.The Respondent’s application makes clear the deficiencies perceived in the Applicant’s Amended Points of Claim.
a.The Amended Points of Claim do not specify any relief sought. This is somewhat cured by the new paragraph 19: “The Applicant seeks declaratory relief setting aside the Deed to the extent that it represents any evidence of a separation or prior distribution of marital assets” although in a pleading, it usually appears as an order properly drafted at the beginning of the documents under “Relief claimed”. However, the declaration described relates only to evidence and is not a cause of action. Lindon v Commonwealth (No 2) [1996] HCA 14; (1996) 136 ALR 251; (1996) 70 ALJR 541 (6 May 1996)
b.The Amended Points of Claim fail to disclose a cause of action.
It seems as though paragraph 15 may disclose a cause of action, that is, the Deed is unenforceable and should be set aside, however the basis for setting aside the Deed is far from clear in the document. Such a cause of action would be between the parties (of which the [Insurer E] is not one) and no facts to support such a conclusion are pleaded. The evidence simply does not support the setting aside of the Deed.
Paragraph 16 suggests a fraudulent misrepresentation but does not particularise what that misrepresentation was, in circumstances where the Applicant signed the document, himself. Ebner & Pappas [2014] FamCAFC 229; (27 November 2014).
Paragraph 17 suggests some form of undue influence but again, does not particularise how this came about, again, in circumstances where the Applicant signed the document, himself and clearly had independent legal advice. ([Ms D] 17 March 2022 paragraph 11 annexure D).
The allegation of fraud in the absence of evidence is scandalous and possibly defamatory. Legal practitioners have responsibilities under the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, particularly Rule 34. Mr Shortland signed the Certificate of Lawyer on the Amended Points of Claim but of course, he relied on what the Applicant told him.
As for paragraph 18 of the Amended Points of Claim, clause 2.7 of the Deed makes it clear that the responsibility to comply with the Deed lies with the Applicant. It is the Applicant who is in default and he cannot sheet this home to the Respondent:
“2.7 Within 28 days of settlement, [Mr Spalla] shall…..”. Paragraphs 2.8 and 2.9 are to the same effect.
c.The Amended Points of Claim do not disclose a cause of action or any remedy sought relevant to the parties to the Family Law proceedings. Paragraph 19 really seeks a finding as to the state of the evidence rather than a remedy or relief. It does not seek to set aside the document.
d.To the extent the Points of Claim allege “criminal conspiracy”, they do not plead any relevant legislation. The events took place in Sydney and are therefore governed by New South Wales law. UCPR Reg 15.3.
Criminal conspiracy is not a crime defined as such in the Crimes Act 1900. It is not the conspiracy which is the crime, itself, but the actions the subject of the agreement.
It is not a common law remedy.
Further, the alleged victim, [Insurer E], is not a party to the proceedings, nor likely to be.
e.To the extent the Points of Claim allege “criminal conspiracy”, they do not disclose any offence or unlawful act in respect of which it is alleged the parties conspired.
Conspiracy requires an agreement between two or more persons to commit an unlawful act with the intention of carrying it out. It is the intention to carry out the crime which constitutes the necessary mens rea for the offence: Yip Chiu-Cheung v R (1994) 99 Cr App R 406 at 410, per Lord Griffiths; R v Wilson (unrep, 12/08/94, NSWCCA).
It is hard to see how an act “by its nature designed to limit or otherwise minimise the capacity of [Insurer E] to seek to recover the amount contained in the writ” (paragraphs 9, 11, 12(a),14) amounts to “a criminal conspiracy”.
f.“an agreement designed to limit, or otherwise minimise the capacity of [Insurer E] to seek and recover the amount contained in the judgment” is not an offence recognised by the Crimes Act 1900 (NSW) nor by the Criminal Code Act 2002 (ACT) nor by the Criminal Code Act 1995 (Cth).
Given the range of civil remedies available should a person put assets beyond a creditor’s reach, it is hard to see how “an agreement designed to limit, or otherwise minimise the capacity of [Insurer E] to seek and recover the amount contained in the judgment” could possibly be a fraud:
a.Family Law Act 1975 section 106B;
b.Bankruptcy Act 1966 sections 120 and 121;
c.Conveyancing Act 1919 (NSW) section 37A.
In addition, the documents produced on subpoena by [Insurer E] make it clear [Insurer E] was still pursuing the further $50,000.00.
6.In summary, the date of separation in the Deed is no more than a matter of evidence, not a fraud nor a conspiracy nor a crime. The Applicant has needlessly delayed proceedings and caused untold distress by making allegations which have no legal or factual basis. The Applicant has failed to properly particularise the serious allegations of fraud, to the point of his claims being frivolous, vexatious or an abuse of process. Re Luck [2003] HCA 70; (2003) 203 ALR 1; (2003) 78 ALJR 177 (4 December 2003).
7.The Amended Points of Claim have no reasonable prospects of success. Spencer v Commonwealth of Australia [2010] HCA 28 (1 September 2010)
Security for costs
8.If the matter proceeds, the Respondent seeks Security for costs pursuant to Part 12.2
a.The Applicant’s financial means
The Applicant’s financial statement dated 26 August 2021 shows:
Total weekly income $ 762.00
Your personal expenditure $ 650.00
Total value of property owned by you $1,000.00
b.the prospects of success or merits of the application;
The discussion of the claim above show limited, if any, prospects of success. Meanwhile, the Respondent is held captive by the Applicant’s baseless allegations.
c.the genuineness of the application;
Given the Applicant’s counsel told the Court at the beginning of the trial that the allegation of fraud was not being pursued and given the manner in which it was raised at abut 3pm on the second day of hearing, there is a serious issue as to whether the Applicant is genuine or vexatious.
d.whether the applicant’s lack of financial means was caused by the respondent’s conduct;
The Respondent says not, as do her daughter, son and daughter in law who all give evidence of money given to the Applicant. The evidence shows that in 2012 when the [V Street, Suburb O] house was sold and the [T Street, Suburb U] house was purchased, the net received from the sale of [V Street, Suburb O] was $169,543.22 + $91,000 deposit = $260,543.22 less commission and deductions.
Aug 2012
Verified on internetParties sold [V Street, Suburb O] sold for [over $900,000]
Mortgage $622,343.87
Profit about $200,000 ($169,543.22 + net deposit)
Husband said “I am happy with $100,000 of that”29
2C64:AE
33, P17
Aug 2012 Parties purchased [T Street, Suburb U] for [over $600,000] (verified on internet)
Mother’s personal loan $30,000
Son $30,000
Daughter $20,00038
39
3H22:B,
CThe Respondent’s evidence is that the Applicant took half that amount and went to [Country B]. Meanwhile, the Respondent reinvested what she had in the [T Street, Suburb U] house.
e.whether an order for security for costs would be oppressive or would stifle the proceeding;
This may be the case but it should be weighed against the oppressive nature of the proceedings.
f.whether the proceeding involves a matter of public importance;
It does not.
g.whether a party has an order, in the same or another proceeding (including a proceeding in another court), against the other party for costs that remain unpaid;
Neither party does, although there is some suggestion the [Insurer E]may have pursued the Applicant for at least the 6 year imitation period.
h.whether the applicant ordinarily resides outside Australia;
he does not but has close ties to [Country B] and cash in [Country B].
i.the likely costs of the proceeding;
The Respondent will likely have to pay a further $71,000 on top of $36,970 already paid ([Ms D] 17 March 2022 para 5-6.).
j.whether the applicant is a corporation;
The applicant is not a corporation.
k.whether a party is receiving legal aid;
The Respondent is not in receipt of legal aid.
l.any other relevant matter.
The Respondent obtained an AVO against the Applicant in early 2022.
9.The proceedings should be stayed while the Applicant provides the security for costs sought.
Summary
10.The Respondent respectfully asks this Honourable Court to make the orders sought.
Written submissions on behalf of the Respondent
The Respondent Father’s written submissions were contained in the Outline of Case filed 1st April 2022; they were as follows (emphasis in original):
1.The Applicant contends the statement of a separation between the parties detailed in the Deed dated 31 January 2014 is false.
2.The contents and consequences of the Deed were never explained to the Applicant and the document was signed in reliance of representations made by his and the Respondent’s children.
3.The Respondent should not be permitted to use the Deed, in so far as it pertains to the separation of the parties.
4.The Applicant contends particulars off the fraud have been substantially provided to the Respondent in correspondence dated 18 October 2021. Deficiencies in those particulars have since been addressed.
5.The true date of separation about 7 November 2019.
6.The Applicant contends an order for security for costs is unnecessary and too late in the proceedings as they are part heard.
7.The issues raised by the Applicant in this interim hearing relate solely to dispute over date of separation. The division of marital assets proceeding the date asserted by the Applicant in November 2019 remains demonstratively inaccurate. Should costs be ordered, it remains open for the Respondent to recover those costs from any final property settlement.
Outline of principle
I note the following matters.
First, the terms of s.117(2) and (2A) of the Act provide:
117 Costs
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) 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.
(2A)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.
Rules 12.02 and 12.03 of this Court’s new Rules provide:
12.02 Application for security for costs
(1)A respondent may apply for an order that the applicant in the proceeding give security for the respondent’s costs.
(2)In deciding whether to make an order, the court may consider any of the following matters:
(a) the applicant’s financial means;
(b) the prospects of success or merits of the application;
(c) the genuineness of the application;
(d)whether the applicant’s lack of financial means was caused by the respondent’s conduct;
(e)whether an order for security for costs would be oppressive or would stifle the proceeding;
(f)whether the proceeding involves a matter of public importance;
(g)whether a party has an order, in the same or another proceeding (including a proceeding in another court), against the other party for costs that remain unpaid;
(h) whether the applicant ordinarily resides outside Australia;
(i) the likely costs of the proceeding;
(j) whether the applicant is a corporation;
(k) whether a party is receiving legal aid;
(l) any other relevant matter.
(3) In subrule (1):
respondent includes an applicant who has filed a reply because orders in a new cause of action were sought in the response.
12.03 Order for security for costs
If the court orders a party to give security for costs, the court may also order that, if the security is not given in accordance with the order, the application or response of the party be stayed.
In Luadaka, at [32] – [63], the Full Court exhaustively canvassed and summarised the following basic matters to be considered in relation to an Application for security for costs.[2] At [59] in particular, their Honours noted the summary of considerations listed in the esteemed text, Quick on Costs, Vol.1. For current purposes, that list (which is set out below) was largely adopted by the Full Court, who also noted that the list of relevant matters cannot and should not be confined to some pre-determined list. The Court also noted that the main reason for not being able to draw up an all-encompassing list is precisely because of the Court’s very wide discretion.
[2] In the Marriage of Luadaka (1998) 24 Fam LR 340. The decision in Luadaka was followed approvingly in a later Full Court decision in Evans v Rochford (2003) 30 Fam LR 336.
It is apposite to note in particular that, at [61] in Luadaka, the Full Court said:
… It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.
And at [62.2], the Full Court confirmed that “ordinarily the court will not undertake a detailed assessment of the likelihood of the Applicant’s success unless it can be demonstrated that there is a high probability of success or failure.”
The list from Quick on Costs, noted by the Full Court at [59], was as follows:
(1)the circumstances of those behind the proceedings and whether it is reasonable for those persons to satisfy an order for security;
(2) the bona fides and prospects of success of the proceedings;
(3)whether the plaintiff is impecunious and whether the defendant’s conduct has caused or contributed to this impecuniosity.
(4)whether the plaintiff is in effect a defendant because, for example, it has been forced to litigate to halt self-help measures by the defendant;
(5)whether it will be oppressive to order security for costs or such an order will prevent the plaintiff from pursuing the proceedings;
(6)whether the proceedings raise a matter of public importance;
(7) whether there has been an admission, offer or payment into court;
(8)whether there has been any delay in bringing the application for security which has occasioned prejudice;
(9) the cost of enforcement;
(10) the costs of the proceedings;
...
Given the unfettered nature of the discretion the factors are at best guidelines to its exercise.”
Should it need to be remarked, a significant number of these considerations are set out in the Rules set out above.
Somewhat more recently, the Full Court in Stephens v Stephens outlined more generally the proper approach to issues of costs for the purposes of s.117(1) and (2A) of the Act.[3] The considerations and outline of principle have been accepted as applying equally to Applications for security for costs as well as costs more generally, as noted in Evans v Rochford, noted above. At [62] – [67] in Stephens, the Court said (emphasis added):
[3] Stephens v Stephens (2011) 44 Fam LR 117. Simply for completeness, I note that at [72] – [73], the Full Court outlined considerations regarding indemnity costs. There is no suggestion that such matters are, or should, be considered in the present matter for the purposes of the current Application.
[62] Section 117(1) of the Act provides: “[s]ubject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.”
[63] Section 117(2) of the Act provides that if, in proceedings under the Act, the court is of opinion that there are circumstances that justify it in doing so, it may, subject to sub-ss (2A), (4) and (5), and the applicable rules, make such order as to costs, whether by way of interlocutory order or otherwise, as it considers just.
[64] Section 117(2A) of the Act provides that in considering what order (if any) should be made under s 117(2), the court shall have regard to the matters set out in paragraphs (a) to (g). In Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 the Full Court (Kay, Warnick and Boland JJ), referring to s 117(2A), said at 130 [41]:
A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 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 subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
[65] As to the relationship between s 117(1) and s 117(2) of the Act in Penfold v Penfold (1980) 144 CLR 311, in joint reasons, Stephen, Mason, Aickin and Wilson JJ said at 315:
It is an accurate description of s. 117 (1) to say that it 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.
Sub-section (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, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in “a clear case”. (Emphasis added.)
[66] As to the nature of the hearing of an application pursuant to s 117 of the Act in Penfold their Honours said at 315-16:
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 (Kent v. Kent [(1970) 92 W.N. (NSW) 503, at p. 505]). 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.
[67] We also observe that in Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) of the Act referred to costs in the conventional sense and thus to the payment by one party to litigation of money by way of a partial indemnity for professional legal fees and expenses actually incurred by another party in the course of the litigation: see Hayne J at 219. 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: Latoudis v Casey (1990) 170 CLR 534 per Mason CJ at 543 and McHugh J at 567; Ruddock and Ors v Vadarlis and Ors (2001) 188 ALR 143 per Full Court of the Federal Court at [12] and Brott and Joachim (2006) FLC 93-259 per Full Court (Holden, Warnick and Boland JJ) at 80,403-404.
For completeness, I need only record that in addition to the reference to the venerable English text of Quick on Costs cited by the Full Court in Luadaka, the Australian equivalent of Quick is Dal Pont’s Law of Costs, which in two Chapters, deals exhaustively with security for costs.[4] Leaving to one side that the Full Court decision in Stephens curiously does not appear to be cited by Dal Pont, the list of matters usually considered in Applications of this kind, and the extremely wide discretion that otherwise applies to them, largely mirrors those set out above. Broadly stated, they include the following: strength and bona fides of the Plaintiff’s/Applicant’s claim; will such an Order oppressively shut out the Plaintiff/Applicant in the pursuit of the claim; the stage of the proceedings and the timing of the Application; any public interest considerations.
[4] G.E. Dal Pont, The Law of Costs (Fifth Edition) (Sydney: LexisNexis Australia, 2021) Chapters 28 (“Nature of Security for Costs Orders”) & 29 (“Discretion to Order Security for Costs”).
Consideration and disposition
In addition to the various Full Court decisions noted above, each of which was decided under slightly different legislative regimes but the articulation of principle remain basal points of reference, for current purposes, the primary point of reference will be r.12.02 of this Court’s new Rules.
The following considerations should not, unless otherwise stated, be taken as any formal findings. Indeed, as the case law noted earlier in these reasons clearly records (e.g. Luadaka in particular), a less than scrupulously detailed assessment of the relative likelihood of success (or otherwise) of the claims being advanced is usually appropriate. This will certainly be the approach here. Further, as also noted above from Stephens, there is nothing to prevent any single factor (as opposed to a prescribed list of factors) being the sole foundation for an order for costs. Summarily, I note the following by reference to Rule 12.02.
Financial means: The Applicant Husband’s financial circumstances, as set out in his Financial Statement, filed 26th August 2021, confirmed that (a) he is a pensioner, (b) his weekly income is $726.00, (c) his weekly expenditure is $650.00, and (d) the total value of property owned by him is $1000.00. It is somewhat curious that in his earlier Financial Statement, filed 7th May 2020, the Applicant Husband declared that the total value of property owned by him amounted to $504,450.00, and that he had liabilities of only $30,000.00. His weekly income and expenditure was also markedly lower than he declared in August 2021.
Because the contest that remains before the Court relates specifically to property matters between the parties, at this juncture and for the purposes of the current Application by the Wife, it is not apposite (or appropriate) to comment on or to examine the discrepancies between the two Financial Statements sworn by the Husband and presumably prepared by his lawyers on his instructions. Such matters may be considered further at the resumed hearing.
Prospects of success: The Wife’s submissions, filed 30th March 2022, at pars.5(a) – (f) and 6, deal extensively with the Husband’s contentions relating to the late-declared issue of fraud. Although formally and primarily set out regarding the Wife’s strike-out Application, the comments made there apply equally to the claim regarding fraud more broadly. The primary points made contend that (a) there is no relevant cause of action pleaded, (b) there is no apposite remedy pleaded, (c) on the facts pleaded there is no “criminal conspiracy” or other unlawful act, and finally, (d) the matters about which the Husband complains, as pleaded, relate simply and solely to matters of evidence and therefore the weight to be attributed to them is the main issue to be determined.
As earlier recorded, it has now been confirmed by the Husband that, contrary to the expansive initial claims, the only matters now claimed to be the subject of the allegation of fraud concern the date of separation of the parties as set out in one of the recitals to the Deed, dated 31st January 2014. Related claims are more generally made regarding the Husband’s understanding of the Deed at the time of signing it, what (if any) legal advice he received prior to signing it, and the role of other members of the family in negotiating both a settlement with the Insurer E and in organising the Deed. No claims of fraud are made regarding any of these other matters.
Because it can only properly be an observation at this stage of the proceeding, to speak generally, given the very confined nature of the claim to that of the date of separation, subject to evidence and submissions, it is difficult to see that this issue can rise very much higher than a matter of evidence. If that be so, the claim of fraud would have to be assessed currently as having relatively low prospects of success.
Genuineness of the application: the way that the claim arose at the very end of the final hearing certainly suggested that it was something of a spontaneous, if not perhaps a somewhat opportunistic, claim. This is especially in circumstances where Counsel for the Husband at the final hearing had confirmed at the outset of the trial that any suggestion of fraud was not part of the Applicant’s case.[5]
[5] Transcript (9th September 2021) pp.9 – 13.
I do not import or infer any mala fides on the Husband’s behalf. I would be very concerned, however, if it be established on the evidence that the Husband was, in effect, sort of “gaming” the litigation, and the claim of fraud in particular, out of some sort of grievance or even vengeance in the light of not only the estrangement from his former Wife, but equally so with both of his adult children. His children are clearly aligned closely with their incapacitated Mother. Given the parties’ genuinely modest means, a protracted further hearing to deal with such serious claims of fraud would be an intolerable financial, emotional and psychological burden on all.
The Applicant’s lack of financial means was not caused by the Respondent’s conduct. No such claim has ever been advanced.
Will an Order for security be oppressive to the Applicant Husband? On the evidence of both parties, unsurprisingly, the litigation is an expensive and fraught exercise. Given (a) the disparities between the Husband’s two Financial Statements, (b) that he has not provided evidence from a tenant who may be rather more than that description connotes, and (c) the lack of disclosure (as alleged by the Wife) about property of various kinds in Country B, it is clearly not an easy assessment to make on this aspect. Such an Order, it may be assumed, will clearly be an impost. How “oppressive” it may or may not be, is difficult to assess with any degree of certitude in the current circumstances and at this juncture in the litigation.
The issues here, while important to the parties, involve nothing of public importance. Similarly of no import or relevance are the matters in sub-paragraphs (g), (h), (j) and (k) of Rule 12.02.
The costs of the proceeding are set out in the respective costs notices, but in general terms (based essentially on Ms D’s Affidavit, filed 17th March 2022, which sets out various financial matters at pars.5-6 that speak for themselves; Ms D is the litigation guardian of her Mother) there would be an estimated extra $71,000 in costs likely to be incurred by the Wife as a result of the fraud claim being prosecuted.
Having regard to the principles outlined earlier in these reasons, and the facts as set out in the Affidavits and summarised above, for present purposes I am satisfied that an Order for security for costs should be made. There can be no doubt at all that the multiple, recent Court events, and those still planned, arise principally if not almost solely as a result of the claim of fraud raised by the Husband at the very end of the final hearing in September 2021. It may be expressed as “but for” this claim being made, which was earlier eschewed by the Husband, the matter would now be, largely if not completely, finalised. Following the hearing in late 2021, all that remained were submissions. Put in slightly more colloquial terms: actions have consequences, in this instance, in the Order for security for costs that arises directly out of the Husband’s newly pronounced and extremely serious claim of fraud, especially having had originally eschewed such a contention.
Further, since the original claim of fraud, the ambit of it has been scaled back quite considerably. It remains to be seen if it will be refined further.
In my view, the amount of security sought by the Wife is somewhat excessive. In my view, the amount that is appropriate, in all of the circumstances, is calculated (in general terms admittedly) on the basis of the events since the final hearing last year, taking into account the multiple directions and other hearings in the early part of this year, plus the preparation that will be required to meet whatever the final form of the Husband’s claims ultimately are or may be. The appropriate sum for security shall be $20,000. It is to be paid to the Wife’s lawyers by noon on 30th June 2022 (approximately 60 days). The proceedings will be stayed until payment of the security is made.
Within 14 days, the parties’ lawyers are to finalise and advise the Court where the security is to be kept, pending further Order of the Court.
The following further procedural Orders should be made to ensure that the mater remains “on track” for the resumed final hearing, thus:
(a)Pursuant to the Wife’s Amended Application in a Proceeding, filed 9th February 2022, within 21 days, the Husband is to provide further and better particulars to the Wife regarding the claim of fraud concerning the date of separation as recorded in the Deed of January 2014. Copies of those “particular” are to be filed with the Court within 7 days of them being provided to the Wife.
I reserve the Wife’s costs of this Application.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of Judge W J Neville. Associate:
Dated: 2 May 2022
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