Stylianos & Stylianos
[2021] FedCFamC1F 145
•21 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Stylianos & Stylianos [2021] FedCFamC1F 145
File number(s): SYC 4367 of 2019 Judgment of: WILSON J Date of judgment: 21 October 2021 Catchwords: COSTS– arbitration. Legislation: Family Law Act ss 13H, s 79, s 117(1) s 117(2A)(c),(d), (e), (f)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021, Ch 12 and 13
Evidence Act (2008) s 128(3)
Cases cited: Bacall v Zagar [2020] FamCA 350
Byrns v Davie [1991] 2 VR 568
Fitzgerald v Fish (2005) 33 Fam LR 123
Ritter v Godfrey [1920] KB 47
Stasiuk & Guild [2021] FamCAFC 62
Division: Division 1 First Instance Number of paragraphs: 36 Date of last submission: 30 September 2021 Place: Melbourne Solicitor for the Applicant: York Law Family Law Specialists Solicitor for the Respondent: CM Lawyers ORDERS
SYC4367 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR STYLIANOS
Applicant
AND: MS STYLIANOS
Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
21 OCTOBER 2021
THE COURT ORDERS THAT:
(1)The applicant’s application for costs of and incidental to this proceeding on an indemnity basis is dismissed.
(2)The applicant’s application for costs of and incidental to this proceedings on a solicitor/ client basis is dismissed.
(3)The respondent must pay the applicant’s costs of this proceeding on a party/party basis, such costs fixed in the sum of $12,500.
(4)On or before 4:00pm on 12 December 2021 the respondent must pay the applicant the sum of $12,500.
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 Stylianos & Stylianos has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
Following the arbitration of this proceeding pursuant to orders made on 28 April 2021 I made consent orders pursuant to s 13H of the Family Law Act registering the arbitral award published on 9 April 2021.
By application in a case filed on 24 May 2021 the husband sought his costs of and incidental to this proceeding on an indemnity basis. That application came before me on 8 June 2021 on which date, by consent, orders were made adjourning the costs application to 1 July 2021 to allow the parties the opportunity of assessing the consequences of implementing the orders made by the learned arbitrator. Each party provided an undertaking not to dispose of certain funds and they otherwise agreed to a timetable to file material in respect of their cost applications. The dates were later modified by agreement. The parties also agreed that the determination of costs would be made on the papers, which I now do.
In essence, the husband contended that a costs order in his favour should be made on a cascading basis and in varying amounts. His primary position was for indemnity costs in the fixed sum of $94,462.55. Alternatively, the husband sought indemnity costs as agreed or as assessed. Alternatively again, the husband sought solicitor/client costs of $79,162.55. If that order was not made, he sought costs on a party/party basis as agreed or as assessed. Finally he sought costs of this costs application.
On behalf of the husband, his solicitor in written submissions contended that the wife hid assets and overcomplicated the proceeding to draw it out. He relied on non-disclosure as well as what he said was “the doomed constructive trust argument”. Other grounds were asserted.
The wife’s primary position on this costs application was that no order for costs should be made. By other words that seemed to amount to a submission that s 117(1) of the Family Law Act should apply with the consequence that she should bear her own costs and the husband should bear his own costs.
SYNOPSIS
Having considered the matter raised in the affidavit material filed on behalf of each party, I am of the view that the wife’s admission that she hid from the husband the inheritance she received from her brother’s estate cannot be overlooked in the context of s 117(2A). Indemnity costs are an exception in this court. I do not accept that exceptional circumstances exist to order indemnity costs and even if I were wrong in that, the amount of indemnity costs sought by the husband would be crushing to the wife. However, it is appropriate to order party/party costs of a fixed amount. I fix $12,500.
RELEVANT ARBITRAL FINDINGS
The arbitrator determined that it was just and equitable to make an order under s 79 of the Family Law Act. The arbitrator proceeded on the basis that the net asset value under consideration was $3,052,844, although that sum included an approximate value ascribed to a certain parcel of land, the eventual sale price of which may have exceeded the amount identified by the parties, namely $2 million. The arbitrator made orders for the sale of that property and from the net proceeds of sale, the arbitrator ordered the wife to pay the husband $225,000 in addition to ordering that half of the net proceeds were to be paid equally as between husband and wife. The arbitrator appears to have taken a dim view of the wife’s approach to her disposal of amounts greater than $800,000. The arbitrator said the following in his award –
“The wife has given in excess of $800,000 to her children in circumstances where she receives a pension that is said to be less than the amount required by her to live each week. I have no doubt that the wife would receive financial assistance from her children should she require such assistance. The loan arrangements of some of the children have a redraw facility and thus they have access to funds to assist their mother. As well, I am satisfied that the wife deliberately disposed of the majority of her inheritance because of her concern as to its relevance in the financial proceedings.”
During the running of the arbitration, issues emerged about wife’s hiding from the husband the fact that she had received and was spending an inheritance. The wife told the arbitrator that she did not want the husband to spend that inheritance on himself which implied that she wanted to spend the inheritance on herself and her children. Of that, the arbitrator found as follows –
“The wife submitted that she does not seek to attribute specific values to certain assets but rather makes the submission that the value is not meaningless. Further, that the husband has the duty of disclosure including any value he wishes to attribute to the assets and the basis of that value. The husband should have provided some evidence as to the value.”
The inheritance was significant, amounting to $1,125,345. The arbitrator found that the wife exhausted over 90% of the inheritance by making gifts to the children in amounts exceeding $800,000.
So far as formal details of the parties were concerned, the husband was 81 and the wife 80. They married in 1962. A dispute existed about the date of their separation, the husband contending it was 2011, the wife contending it was 1994. The parties divorced in 2019. The arbitrator found that the relationship was relatively long, the husband contending 49 years, the wife 32. It seems they were separated under the one roof for a long period.
During the arbitral hearing the arbitrator made an order pursuant to s 128(3) of the Evidence Act 2008 yet the actual order with transcript attached was not prepared for the arbitrator’s signature.
In written submissions prepared on behalf of the husband on this costs application, the husband contended that an order for costs in his favour should be made. That was because, so the husband asserted –
(a)the wife failed to engage in any pre-action disclosure in the period February 2017 to July 2019 at which time the husband was forced to commence family law litigation (his words);
(b)the wife failed to disclose any documentation related to letters of administration in respect of her brother’s estate until the first day of the arbitration;
(c)the wife failed to produce bank statements from five separate bank accounts to demonstrate that the wife was “parking” (the husband’s words) her inheritance and which were only produced after subpoenae had been issued;
(d)the 13 subpoenae issued in relation to the wife’s inheritance had been directed to documents in respect of accounts held jointly with the wife’s children and, according to the husband, caused the arbitration to be extended by one day;
(e)the wife persisted, erroneously according to the husband, in arguing that she held title to certain assets on a constructive trust in favour of certain of her children; and
(f)the husband was forced to follow the flow of funds relating to her inheritance from account to account.
THE HUSBAND’S EVIDENCE ON THIS COSTS APPLICATION
The husband made an affidavit on 21 May 2021 in support of this costs application. The husband structured his evidence in that affidavit to narrate factors he said supported a costs order under any of s 117(2A)(c) (conduct of the parties), s 117(2A)(e) (an issue that was wholly unsuccessful), s 117(2A)(d) (failure to comply with a previous court orders) and s 117(2A)(f) (an offer in writing).
It is necessary to take each in turn.
CONDUCT OF THE PARTIES – S 117(2A)(c)
The wife’s brother died in mid-2015 leaving a significant sum to the wife. The arbitrator found that the sum left to the wife was $1,125,837.56. The husband deposed to the wife receiving that sum in two tranches. The husband deposed to the wife failing to disclose the inheritance she received with the consequence, according to the husband, that he was unable to “determine where the money was, how much was actually received or what Ms Stylianos did with the money”.
The husband also deposed to his solicitor making 13 separate requests for disclosure about the estate over the period February 2017 and February 2021. The husband deposed to the responses provided by the wife’s solicitors over that period. Those responses included correspondence form the wife’s solicitor in April 2020 pointing out that letters of administration had been granted rather than probate, and a letter from the wife’s solicitors in January 2021 informing the husband’s solicitors that the wife had received $1,125,837.56 along with documentation from the Supreme Court of Victoria provided to the husband’s solicitors on the first day of the arbitration.
The husband deposed to orders made when this proceeding was before the Federal Circuit Court of Australia and the wife’s non-compliance with those orders, specifically referrable to disclosure concerning the wife’s brother’s estate. Those orders were made on 8 April 2021, 11 May 2020 and 5 June 2020. The husband also deposed to the wife not complying with those orders.
The husband deposed to his solicitor’s request for the provision of disclosure in relation to bank statements. The husband said his solicitor wrote to the wife’s solicitor calling for the bank statements on seven occasions between 3 February 2017 and 3 November 2018. He said five bank accounts were disclosed two of which were opened subsequent to the husband’s request for disclosure. The husband also deposed to the wife’s creation of accounts in the joint names of the wife and the parties’ son into which part of the inheritance amount was deposited. The husband also deposed to ascertaining that the wife had deposited certain sums derived from the inheritance into the parties’ daughter’s mortgage account. The husband deposed to part of the wife’s inheritance being deposited into a transactional account. The husband deposed to ascertaining that fact in January 2021.
So far as the wife’s inheritance was identified in financial statements filed during the course of this litigation, the husband said that the sum of $1,125,345.71 (a different sum to the inheritance) was revealed in an affidavit made by the wife on 29 January 2021.
The wife made an affidavit in relation to costs on 1 September 2021. At paragraph 18 of that affidavit the wife mentioned paragraph 9 of the arbitrator’s orders. That order related to costs associated with non-compliance with the arbitral award. That was a different and unrelated point to the husband’s costs application. She said she will suffer hardship if forced to pay legal costs, citing her age, ailing health and currently modest financial condition. She also addressed aspects of her disclosure of the inheritance she received from her brother. In broad terms her evidence revealed that she received the inheritance in 2017. This litigation was commenced in 2019. She admitted attempting to hide her receipt of that inheritance.[1]
[1] Paragraph 33 of the wife’s affidavit sworn 1 September 2021.
Pausing there, having known of her inheritance two years before the commencement of this litigation, she was from the commencement of the litigation bound by duties to the court to make full and frank disclosure in accordance with (what was then) Chapter 13 of the Family Law Rues. In Bacall v Zagar,[2] I surveyed the metes and bounds of those duties. The wife’s admission that she did try to hide the inheritance from the husband represents, to my way of thinking, concealment rather than disclosure of relevant financial information. The amount was substantial. I reject the wife’s statement that in her opinion she did make all reasonable attempts to provide disclosure of her inheritance. Her affidavit in which that statement appeared was prepared by a solicitor. The assertion of her opinion was not a fact. It was wrong. Solicitors have a higher duty to excise argumentative, false and self-serving assertions from affidavits. The wife was under a duty to inform the husband from the first moment this proceeding was commenced of her true financial position. She failed to do that. Worse, she admitted to hiding the inheritance. The act of hiding required a concerted endeavour, a deliberateness, a determined objective. That was wholly antithetical to the duties underpinning Chapter 13 of the Family Law Rules.[3] It must not be forgotten that compliance with the disclosure obligations under the Family Law Rules carry with them serious sanctions. By deliberately hiding information about the inheritance it is arguable that the wife may well have engaged in conduct to which those serious sanctions apply. Anyone who assisted her in achieving her ends of hiding the existence of the inheritance may also be implicated in any such conduct. This court must set its face against such behaviour. A costs order is an appropriate method of demonstrating the court’s disapproval of that behaviour.
[2] [2020] FamCA 350.
[3] Now Chapter 6 of the Federal Circuit and Family Court of Australia (Family Law) Rules2021.
Seemingly by way of riposte, the wife asserted that the husband had failed to diligently disclose the full extent of his landholdings in Country B. She identified –
(a)a 50% interest in a ground floor unit at C Street, City D, Country B;
(b)two separate parcels of land in E Town, City D, Country B; and
(c)a parcel of land at F Town, City D, Country B.
The arbitrator considered those parcels of land in paragraph 164 of the arbitral award. The wife’s complaint about any non-disclosure by the husband in relation to those parcels of land was ill-directed.
WHOLLY UNSUCCESSFUL ARGUMENT – S 117(2A)(e)
Next, the husband argued in support of his costs application that the wife unsuccessfully contended that the wife held a half interest in real estate in Suburb G on a constructive trust for the parties’ son. The husband said the arbitrator found that the wife’s evidence was unsatisfactory. The arbitrator found that the wife did not hold her interest on behalf of her son.
The husband’s submissions in relation to the consequences of the wife asserting, then failing, on the constructive trust argument was inconsistent. In paragraph 1(d) of his submissions the husband described the wife’s contentions about the constructive trust as “nonsensical”. In paragraph 5(a) of his submissions the husband said the wife’s constructive trust argument was unsuccessful yet in paragraph 5(b) of his submissions the husband said that overall, neither party was successful. It is competent for a court to segregate one or more issues in which a party may have been unsuccessful in any costs consideration under s 117. Here, the question of the existence of a constructive trust was agitated, as it happens unsuccessfully for the wife, as she failed in her contention that the Suburb G property was not matrimonial property. In paragraph 50 of his affidavit filed in support of his costs application, the husband argued that in pursuing this issue he was required to address the matter with the wife’s solicitor, he had to address the matter in his affidavit and the parties’ son was required to give evidence.
It is far from uncommon for a party to family law litigation to fight hard on a particular issue only to lose on that issue. In common law courts, it is competent for a court to make a costs order in favour of a party on a discrete issue even if that party fails in the overall.[4] However, such an approach is far less common in courts exercising power under s 117 of the Family Law Act. Having regard to my decision in relation to costs generally, I do not consider that it is appropriate to segregate costs incurred by the husband in resisting the constructive trust argument advanced by the wife. She bore the burden of demonstrating her contention in relation to the constructive trust. She failed to do so. While I accept that the husband was required to adduce certain evidence by way of resisting the wife’s constructive trust contentions, I do not consider that the constructive trust component of this litigation represented a discrete component in the overall aspects of the litigation such that the husband’s costs of resisting it should be ordered.
[4] Ritter v Godfrey [1920] KB 47, Byrns v Davie [1991] 2 VR 568.
ANY OFFER IN WRITING – S 117(2A)(f)
Two offers were said to be relevant.
The first, on 18 May 2020, involved the wife paying the husband $972,282.86 from the proceeds of sale of the Suburb H property. The husband said he will ultimately receive $1,635,000.
The second on 1 June 2020, involved the husband accepting $1,326,504. The property sold for $2,770,000. The husband said he will ultimately receive $1,635,000.
Indemnity costs sought
In several decisions in this court that bind me, the most recent of which is Stasiuk & Guild,[5] it has been repeatedly held that that an order for indemnity costs is to be made only in exceptional circumstances. Further, it has been held that any cost order that deviates from a cost under s 117(1) must, in all the circumstances, be just.[6] The wife has deposed to her current financial circumstances. Those have not been tested by cross examination and I therefore must do the best I can based on untested assertions about whether her version of her financial circumstances is likely to be correct. For present purposes I accept that the wife –
(a)receives $464.45 per fortnight by way of Centrelink payments;
(b)is of advanced years and in indifferent health;
(c)has no superannuation;
(d)lives modestly;
(e)has savings presently stated at $8897.61;
(f)is in the care of a surgeon in relation to skin cancer; and
(g)must purchase a property from the net process of sale of the former matrimonial home.
[5] [2021] FamCAFC 62.
[6] Fitzgerald v Fish (2005) 33 Fam LR 123.
The husband sought indemnity costs of $94,462.55. The wife asked for no costs order to be made. The husband proposed solicitor/client costs of $82,931.55. He then proposed party/party costs of $79,162.55 if an order for solicitor client costs were refused.
None of those proposals are acceptable in my view.
I am prepared to make an order for party/party costs but not in the sum sought. Indemnity costs or even solicitor/client costs would operate in a punitive and crushing manner. It would not be just to make such an order, still less in the sum sought. I am not willing to characterise wife’s dereliction of duty in her non-compliance with her disclosure obligations as “exceptional” so as to support an order for indemnity costs. But even if I had been persuaded to construe the wife’s behaviour as warranting the imposition of indemnity costs, thereby conferring upon the husband a full or near complete indemnity for the costs of this litigation, I take the view that the sum sought is crushing in the circumstances. It would not be just to make such an order. Even if, on assessment, indemnity cost were to be assessed at a sum less than the amount presently claimed by the husband ($94,462.55) the same consequence is likely to befall the wife, in that such an amount is or is likely to be crushing.
In my view an order for party/party costs is appropriate. I make it on the basis that the wife deliberately concealed information about her inheritance and the way she applied those funds. The case may well have resolved without the need for arbitration had she revealed her inheritance.
The next issue is the quantum of any such costs order. Any amount is likely to orchestrate a degree of hardship to the wife. But some amount is appropriately ordered to reflect the court’s opprobrium for the wife’s conduct in hiding her receipt of the inheritance. Given that the indemnity costs claimed of more than $90,000 would be crushing, an amount much less than half that sum is appropriate. The rules of court empower me to make an order for the payment of a costs order in a fixed sum.[7]
[7] Chapter 12 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.
In my view the sum of $12,500 for party/party costs is just, having regard to the wife’s financial circumstances. That sum must be paid to the husband on or before 4:00pm on 12 December 2021.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 21 October 2021
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