Swarb and Swarb (No 2)

[2013] FamCA 996

FAMILY COURT OF AUSTRALIA

SWARB & SWARB (NO 2) [2013] FamCA 996

FAMILY LAW – COSTS – Where wife sought costs against husband on an indemnity basis or, alternatively, on a party-party basis – Where the husband opposed the making of such orders – Consideration of s 117 – Where the court is satisfied that the husband should pay a portion of the wife’s costs – Where the quantification of those costs is problematic on the basis of the evidence before the court – Where costs order is made on a party-party basis as agreed or as assessed.

Family Law Act 1975 (Cth) s117

Colgate-Palmolive v Cussons Pty Limited (1993) 46 FCR 225
Kohan & Kohan (1993) FLC 92-340
Swarb & Swarb [2013] FamCA 404
Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029

APPLICANT: Ms Swarb

RESPONDENT: Mr Swarb

FILE NUMBER: PAF 1593 of 2005

DATE DELIVERED: 17 December 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 13 September 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Batey

SOLICITOR FOR THE APPLICANT: Kazi Portolesi Lawyers

COUNSEL FOR THE RESPONDENT: Mr Jackson

SOLICITOR FOR THE RESPONDENT: Lamrocks Solicitors

Orders

1. That, on a party-party basis, the husband pay the costs of the wife incurred as a consequence of his assertion that he held a 25 per cent interest, rather than a 40 per cent share, in real estate known as “C” in Country D and including the costs of the wife’s valuation of that property, with such costs to be in a quantum agreed or assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Swarb & Swarb has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: PAF 1593 of 2005

Ms Swarb

Applicant

And

Mr Swarb

Respondent

REASONS FOR JUDGMENT

the proceedings

1. The parties now remaining in these proceedings, Mr Swarb and Ms Swarb, have been embroiled in litigation since 2005.  Their competing applications for alteration of property interests were listed for trial before me in 2009 but adjourned for a combination of reasons.  The matter ultimately proceeded to trial before Coleman J in March 2011 and April 2013.  His Honour delivered judgment and made orders on 3 May 2013.

2. The wife now seeks orders that the husband pay her costs of the proceedings on three alternate bases: 

   1.on an indemnity basis as and from 28 February 2006 in the amount of $385,791.98

   2.on an indemnity basis as and from 28 February 2006 as agreed or assessed

   3.on a party/party basis as and from 28 February 2006 as agreed or assessed.

   I was not informed of the significance of the date 28 February 2006.  The husband opposed making any order for costs in favour of the wife.

The Evidence

1. The wife relied on an affidavit with annexures and exhibits which totalled 453 pages and had a thickness of approximately 5 centimetres.  The wife also insisted that I read large extracts from the court file, being the following documents:

   2.1      Applications & Responses

   2.1.1   Husband’s Initiating Application Filed 5 October 2005

   2.1.2   Husband’s Amended Application Filed 7 January 2009

   2.1.3   Husband’s Further Amended Application Filed 12 May 2009

   2.1.4   Wife’s Response Filed 14 July 2009

   2.2      Affidavits & Financial Statements

   2.2.1   Husband’s Affidavit Filed 6 March 2009

   2.2.2   Husband’s Financial Statement Filed 05 October 2005

   2.2.3   Husband’s Financial Statement Filed 30 November 2007

   2.2.4   Husband’s Financial Statement Filed 06 March 2009

   2.2.5   Affidavit of Mr V Filed 06 March 2009

   2.2.6   Affidavit of Ms X Filed 09 March 2009

   2.2.7   Affidavit of Ms Y Filed 06 March 2009

   2.2.8   Affidavit of Ms X Filed 06 March 2009

   2.2.9   Affidavit of Mr M Filed 06 March 2009

   2.2.10 Wife’s Financial Statement Filed 02 March 2006

   2.2.11 Wife’s Conciliation Conference Doc’ Filed 02 March 2006

   2.2.12 Wife’s Financial Statement Filed 21 March 2011

   2.2.13 Wife’s Affidavit Filed 06 March 2009

   2.2.14 Affidavit of Mr M

   2.3Correspondence

   2.3.1Correspondence to Lamrocks Solicitors dated 10 December 2007

   2.3.2Correspondence to Lamrocks Solicitors dated 13 April 2011

   2.3.3Correspondence to Lamrocks Solicitors dated 11 May 2011

   2.3.4Correspondence to Lamrocks Solicitors 28 February 2006

   2.3.5Correspondence to Lamrocks Solicitors 5 July 2006

   2.3.6   Correspondence from Lamrocks Solicitors 1 November 2006

   2.3.7   Correspondence from Lamrocks Solicitors 14 November 2006           2.3.8           Correspondence from Lamrocks Solicitors 19 December 2006

   2.3.9   Correspondence from Lamrocks Solicitors 20 December 2006

   2.3.10 Correspondence from Lamrocks Solicitors 28 November 2007

   2.3.11 Correspondence from Lamrocks Solicitors 28 November 2007

   2.3.12 Correspondence from Lamrocks Solicitors 7 December 2007

   2.3.13 Correspondence from Lamrocks Solicitors 10 December 2007

   2.3.14 Correspondence from Lamrocks Solicitors 1 April 2008

   2.3.15 Correspondence from Lamrocks Solicitors 6 May 2008

   2.3.16 Correspondence from Lamrocks Solicitors 1 June 2009

The husband simply relied on written submissions prepared by his counsel.

1. The matter was listed for oral argument on the question of costs on 13 September 2013.   On that date I was invited by counsel to determine the costs issue on the basis of the written evidence and submissions.

Approach To These Proceedings

1. Section 117(1) of the Family Law Act 1975 provides:

   Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

   The wife submits that there are circumstances which justify an order for costs in her favour pursuant to section 117(2), which provides:

   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) and (5) 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.

   Section 117(2A) provides:

   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.

   Subsections 117(4),(4A) and (5) have no relevance to the present application.

Consideration

Section 117(2A)(a)

1. I have no evidence as to the current financial circumstances of the husband.  The only information on that issue is that which can be gleaned from the judgment of Coleman J.  His Honour’s orders allowed the wife to acquire the husband’s interest in a property in Suburb E upon payment to him of the sum of $174,297.  It seemed to be anticipated that she would make this payment with the assistance of an adult son of the parties.  The husband would retain his interest in a parcel of real estate in Country D and a modest superannuation benefit.  The wife would further retain her jewellery.

2. The wife swore a Financial Statement on 3 September 2013 in which she deposed to a total weekly income of $386 and net assets of $420,500, excluding alleged loans from her son Mr M to a total sum of $269,430.  She is the sole owner of the Suburb E property thus it can be inferred that the husband received a payment of $174,297 in accordance with the orders of Coleman J. 

3. The husband and the wife are presently aged 61 and 57 respectively.  At the time of the trial they were each in receipt of a disability pension.  His Honour recorded that the husband may have derived a modest income from taxi driving but it seems clear that neither party has any real capacity for income generating employment.

Section 117(2A)(b)

1. Neither party is in receipt of a grant of legal aid.

Section 117(2A)(c)

1. The main thrust of the wife’s application for costs appeared to be the husband’s alleged conduct in relation to his interest in a parcel of real estate in Country D, which was referred to throughout the proceedings as “C”.  It is certainly the case that Coleman J commented adversely on the husband’s evidence in relation to his ownership of real property in Country D on multiple occasions in the reasons for judgment.

2. Examples of his Honour’s adverse comments as to the husband’s credit in relation to Country C property included the following: 

   7.        The issues for trial have ultimately been few in number and, with one significant exception, of comparative simplicity.  Regrettably, the husband’s conduct throughout the proceedings, through misdisclosure, non-disclosure and/or refusal to admit facts which he clearly should have admitted, has resulted in the wife incurring far greater legal expenses than she should have.  Those matters potentially have dual relevance.  They are obviously relevant to the assertion of Counsel for the wife that the Court find that the husband’s conduct enlivens “principles” emerging from cases such as Oriolo & Oriolo (1985) FLC 91-653, Black & Kellner (1992) FLC 92-287 AND Weir & Weir (1993) FLC 92-338. The second, which is more appropriately dealt with after judgment in the substantive proceedings is delivered, relates to costs.”

   12.      The husband’s evidence generally is also relevant in relation to the extent and veracity of his financial disclosures throughout the proceedings.  The husband’s inconsistent sworn statements as to the extent of his interest in property in [Country D], referred to throughout the evidence as [C], leave him open to an adverse credit finding.  So do his repeated sworn assertions of what he clearly knew was an understatement of his interest in that property, and his refusal to admit the true extent of his interest.  No credible explanation for the husband’s failure to truthfully and accurately disclose his interest in [C] has ever been advanced.”

   103.    So far as the 20 per cent interest in [C] which was transferred to the husband by his uncle is concerned, somewhat different considerations apply.  The evidence of the husband in cross-examination generally with respect to financial matters was not compelling.  It was least compelling in relation to the acquisition of the interest of his uncle.  As is not in doubt, the husband was persistently and consistently evasive in relation to his interests in property in [Country D].

3. The value of the husband’s interest in property “C” was described by his Honour as “highly contentious” and was the subject of expert evidence from Lebanese valuers.  They asserted values of US$460,000 and US$90,000 on behalf of the wife and the husband respectively.

4. His Honour remarked on the difficulties with the evidence of each of these expert witnesses.  One example is as follows:

   67.      It is unnecessary to refer in further detail to the cross-examination of the respective valuers.  Whatever a Court applying the laws of [Country D] might conclude, by the standards of Australian law, and by reference to the principles of valuation which Australian courts have long accepted, the Court is comfortably satisfied that the valuation of each expert was shown to have significant shortcomings, and that neither could be accepted without qualification of the balance of probabilities in the light of those shortcomings.

5. Ultimately, his Honour determined that the preferable course was to accept the evidence of the wife’s valuer, albeit with some misgivings.  His Honour said:

   79.      On balance, and without suggesting that the issue is beyond doubt, the Court concludes that it should prefer the evidence of the wife’s valuer’s to that of the husband’s valuer, and ought not attempt to exercise expertise which the Court does not have, particularly in the context of there being insufficient data available to rely upon in any purported valuation exercise by the Court. 

6. His Honour commented further on the valuation issue as follows: 

   81.      In all the circumstances, the Court prefers the valuation of the wife’s valuer to that of the husband.  So doing, the valuation of the husband’s interest in the property [C] is $460,000.  As will be seen, and fortunately, a just and equitable determination of the present proceedings does not turn decisively or event significantly upon so concluding.

7. The written submissions on behalf of the wife summarised the nub of her case for costs as follows: 

   Primary S.117(2A) considerations in this matter:-

   5.1      117(2A)(c) the conduct of the proceedings – in summary, the wife’s claim for her costs include the costs associated with the husband unduly prolonging the proceedings by failing to either initially disclose his real estate holdings, then by failing to attend to obtaining expert evidence from suitably qualified valuers – this failure applied to both his property in [Country D] and the extent he relied on family members to disguise his actual real estate holdings and their value.

   5.2      117(2A)(e) the wife being wholly unsuccessful – in the sense identified by the Full Court hereunder the husband was wholly unsuccessful in the Orders sought by him that he either pay to the wife a sum equal to 50% of the net equity in the [Suburb E] property or some lesser amount, or in the face of a denial by him of any substantial real estate holdings in [Country D], that he transfer his interest in the property in [Country D] to the wife.”

8. The conduct of the husband of which the wife complained was summarised in the written submissions on her behalf as follows:  

   6.  Conduct:-

   6.1      It is submitted that the following is relevant in relation to this factor:-

   6.1.1   The disclosure purported to be relied upon by the husband as to the husband’s assets was from the commencement of the proceedings to the hearing before Justice Coleman deficient in both is % interest and the value of that interest in what became known as “Lot [C]”.

   6.1.2   The husband’s maintenance throughout the trial – notwithstanding the evolving evidence by the wife and her expert as to the likely holding of the husband at greater than 25% - and a significant value of his share saw the husband maintain a 25% interest in the property with a value he attributed at between US$7,500 AND us$9,000.

   6.2      The approach taken by the husband to the conduct of the litigation was initially a failure to disclose the full extent of his property holdings in [Country D] or their realistic value.” (references omitted)

9. Dealing firstly with the value of property C, I have referred above to comments made by Coleman J as to difficulties with the valuation evidence in the case for each of the parties.  It was clear that his Honour preferred the evidence of the wife’s expert but not without significant misgivings. 

10. Until the commencement of the trial listed before me in March 2009, the husband asserted an inaccurate quantum of his interest in property C and an unrealistic estimate of its value.  For example, in his Financial Statement of 27 November 2007 he ascribed a value of $8,554 to his interest in this property.  In his Financial Statement of 6 March 2009 he asserted that he held a 25 per cent interest in this property, to which he attributed a value of $7,500.

11. In my view, it beggars belief that proper enquiries by the husband would not have equipped him to make a more accurate assessment of the value of his interest in this property.  It seems to me that the wife had no alternative but to obtain her own evidence as to the value of this asset.  It is extraordinary that the husband asserted a value of $7,500 on the eve of a trial, yet the Court found the appropriate figure to be $460,000.  I appreciate that the husband obtained his own expert valuation evidence but he did so only at a very late stage in the proceedings.

12. The husband’s protracted insistence that he held only a 25 per cent interest in property C was finally brought to an end only in a Case Outline document dated 20 March 2011 (page 29 exhibits to the wife’s affidavit of 29 August 2013).  In these circumstances, I consider that the wife was entitled to engage professional persons in Country D to investigate this matter.

13. The wife asserted that the husband held a beneficial interest in three additional properties in Country D, which were referred to during the proceedings as “A”, “F” and “G”.  From the outset of the proceedings the husband denied that he held any beneficial interests in these parcels of Country D real estate:  see, for example, letters dated 14 November 2006 and 20 December 2006 from his solicitors to the wife’s lawyers (pp6-9 of annexures to the wife’s affidavit of 29 August 2013).  Ultimately, Coleman J held that the husband had no beneficial interest in any of these properties.

14. The wife chose to expend significant funds in pursuit of her allegations that the husband held a beneficial interest in these properties.  Effectively, she now seeks to sheet home these costs as part of the sum of $385,791.98 which she seeks from the husband.  I am at a loss to understand how she could possibly succeed with such a claim.

15. The wife contended that the husband was responsible for delay in finalisation of the proceedings.  On her behalf it was submitted that the trial dates allocated before me in March 2009 were “adjourned at the husband’s insistence”.  That contention accords with neither my own recollection nor the relevant bench sheet.  There was a problem with the availability of an expert to give evidence by telephone from Country D and it was considered desirable that the trial be completed in one tranche.

16. It is notable that Coleman J warned the parties and their lawyers on 23 March 2011 that there would be a substantial delay with a resumption of the trial if they failed to complete the matter within the allocated time.  His Honour said:

    HIS HONOUR:  This is a Federal Magistrates Court type case there’s not even a million bucks in it.  Goodness knows when it’s going to finish.  If it doesn’t finish Friday, it’ll be August at the earliest.  So, be on notice.  What’s the next question?

17. In my opinion, the wife failed to establish that delay in finalisation of the proceedings was attributable to the husband.  I simply do not know why the matter was completed only in April 2013.  I would observe that the wife pursued her allegation that the husband held beneficial interests in properties F, G and A to the very end of the proceedings.  It seems to me to be entirely possible that this conduct contributed to the prolongation of and delay in completion of the proceedings.

Conclusion

1. I am satisfied that the husband should pay that portion of the wife’s costs which is attributable to the husband’s failure to acknowledge that he held a 40 per cent share in property C rather than a 25 per cent interest therein. 

2. For reasons indicated above, I am also satisfied that he should pay her costs attributable to the valuation of his interest in that asset.  Quantification of those costs is problematic on the basis of the evidence before me, despite its great volume. I simply cannot identify the costs which are attributable to those issues.  I can do no more than make an order that the husband pay that portion of the wife’s costs as agreed or assessed.

1. The wife sought an order that the husband pay her costs on an indemnity basis.  The Full Court in Kohan & Kohan (1993) FLC 92-340 said, inter alia, of indemnity costs: “such an order is a very great departure from the normal standard…” and “the general expectation underlying these Rules is that costs will usually be taxed either on a party/party basis or on a solicitor/client basis”.  (page 79,611)

2. In Yunghanns & Ors & Yunghanns & Ors & Yunghanns (2000) FLC 93-029 the Full Court affirmed that indemnity costs order is “a very great departure from the normal standard”.  Their Honours referred with approval to the decision of Shepherd J in Colgate-Palmolive v Cussons Pty Limited (1993) 46 FCR 225 at 233 as follows:

   31.      …It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought.  All that is required is that the Court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”:  per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.

3. In circumstances where the wife pursued to the very end an allegation that the husband held the beneficial interest in three properties in Country D, despite his denials from the outset of the proceedings, I am not prepared to order that he pay her costs on an indemnity basis. 

I certify that the preceding thirty one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 17 December 2013.

Associate:     

Date:              17 December 2013