Tilston & Tilston and Ors (No. 2)
[2020] FamCA 1105
•21 DECEMBER 2020
Family Court of Australia
Tilston & Tilston and Ors (No. 2) [2020] FamCA 1105
File number(s):
BRC876/2017
Judgment of:
CAREW J
Date of judgment:
21 December 2020
Catchwords:
FAMILY LAW – COSTS – Where a final property order has been made – Where the husband seeks to recover from the wife costs incurred in the property proceedings – Where an order has been made dismissing a son’s claim for damages for misleading and deceptive conduct or in the alternative a breach of fiduciary duty – Where the husband seeks to recover from the son costs incurred as a result of defending the claim – Where the circumstances of this case do not justify a costs order against either the wife or the son - Where there will be no order as to costs.
Legislation:
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Cases cited:
Costigan & Costigan and Ors (No 2) [2017] FamCA 886
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Anor (2005) 33 Fam LR 123
Penfold v Penfold (1980) 144 CLR 311
Number of paragraphs:
38
Date of last submission/s:
30 November 2020
Date of hearing:
In chamber by way of written submissions
Place:
Brisbane
ORDERS
BRC876/2017
BETWEEN:
MS TILSTON
Applicant
AND:
MR TILSTON
First Respondent
MS A TILSTON
Second Respondent
MR B TILSTON
Third Respondent
order made by:
CAREW J
DATE OF ORDER:
21 DECEMBER 2020
THE COURT ORDERS THAT:
1. There be no order as to costs.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tilston & Tilston has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
On 3 September 2020, I concluded a six day property trial between Ms Tilston (“the wife”), Mr Tilston (“the husband”) and their two adult children, namely, Ms A Tilston (“the daughter”) and Mr B Tilston (“the son”). In addition to the property trial between the wife and the husband, the son sued the husband for damages arising out of alleged misleading and deceptive conduct, or, alternatively, for a breach of fiduciary duty relating to the operation of a family partnership and self-managed superannuation fund. I delivered judgment in relation to both the property claim and the misleading and deceptive conduct/breach of fiduciary duty claim on 12 October 2020.
An order was made awarding the wife 57.5% of the property ‘pool’ excluding the capitalised value of the husband’s Defence Force Retirement and Death Benefit (“DFRDB”) pension. The husband was awarded 42.5% of the property pool and retained his DFRDB pension. The monetary effect of the order reflects the wife retaining assets to the value of approximately $2,754,568 and the husband retaining assets to the value of approximately $2,035,985 plus his DFRDB pension. The wife was also ordered to deliver a diamond ring to the daughter that had belonged to the husband’s mother. The son’s claims against the husband were dismissed. However, the son was to retain his quarter share in a four way partnership ($44,532) and his beneficial entitlements in the Tilston Family Superannuation Fund ($76,407).
The husband now applies for costs to be paid by the wife and son. The application is opposed. Pursuant to the order made on 12 October 2020, and with consent of the parties, the application for costs is determined in chambers after receipt of written submissions.
For the reasons set out below, I propose to dismiss the husband’s application for costs.
brief BACKGROUND
The dispute that arose between the parties was complex and protracted with issues going to jurisdiction, misleading and deceptive conduct, breach of fiduciary duties, and the overall entitlements of both the wife and the husband to a property settlement. The dispute also included an issue about ownership of a diamond ring belonging to the husband’s late mother. A detailed background of the dispute is contained in my Reasons for Judgment delivered 12 October 2020 at [12] – [56], and the issues for trial are identified at [5] – [10].
Up to and including the trial, the wife, husband, and son had collectively incurred legal fees of approximately $1,750,000. The daughter was self-represented throughout. The wife’s costs were approximately $876,190, the husband’s approximately $393,916 and the son approximately $490,605.
THE HUSBAND’S SUBMISSIONS
The husband seeks the following order in relation to costs:
(1) As against the wife in favour of the husband with respect to:
(a) the Contravention Application filed by her on 20 November 2018 and discontinued on 9 July 2020;
(b) the Application in a Case for the appointment of the Trustee for Sale filed on 14 November 2018;
(c) the Application in a Case filed by the Trustee for Sale on 5 April 2019;
(d) the Application in a Case filed by the wife relating to disclosure filed on 28 July 2020 and withdrawn on 4 August 2020;
(e) the jewellery; and
(f) the ownership and value of the trees.
(2) As against the son for the costs incurred by the husband in defending the Orders sought by the son since he was joined as a party to these proceedings on 5 December 2017.
The husband argues that his application for costs should succeed for the following reasons:
(a) Conduct:
(i) Conduct of the wife and the son in relation to an order made by the Federal Circuit Court of Australia on 27 August 2018 which led to unnecessary and avoidable costs. In the husband’s submission, the order was made in circumstances where the son submitted a draft order to the judge without consultation with the husband and contrary to the direction of the judge made on 10 July 2018. As a consequence of the son’s conduct in so acting, the husband sought the relisting of the matter. Before the matter returned to the judge (and knowing the husband had requested the relisting of the matter) the wife filed an application seeking enforcement of the order. A further consequence of the irregularity in the making of the order was the husband having to file an Application for the appointment of a Trustee for Sale of all the real properties. The wife opposed that application. On 21 November 2018, the issues were resolved by consent and the husband argues that the costs incurred by him of $18,794.79 were unnecessary and arose as a consequence of the conduct so described;
(ii) Conduct of the wife in relation to a Contravention Application filed on 1 April 2019. The wife alleged in that Application that the husband had contravened the order made on 27 August 2018 (the order that the husband alleged was entered improperly). The husband filed a Response to the Contravention Application seeking that it be dismissed. The wife discontinued her Contravention Application on 9 July 2020. The husband argues that the costs incurred by him of $6,997.15 were thrown away;
(iii) Conduct of the son in relation to a Contravention Application filed on 1 April 2019 which was discontinued by him on 10 July 2020. The husband argues that his costs of $739.41 were thrown away;
(iv) Conduct of the wife and the son in relation to an Application filed by the Trustee for Sale which the husband argues was only necessary because the wife and son refused to consent to the Trustee’s reasonable requests. On 8 April 2019, an order was made in the terms sought by the Trustee. The husband’s costs allegedly thrown away were $2,561.53;
(v) Conduct of the wife and the son in relation to an Application filed by the husband on 27 November 2019 which sought an order for the appointment of a single expert to settle the dispute between the parties about the proper apportionment of the proceeds of sale of certain property between the Tilston Family Superannuation Fund (“TFSF”) and the Tilston Family Trust (“TFT”). The husband proposed that 37.66% of the proceeds be attributed to the TFSF and 62.33% to the TFT. The son disagreed and argued for the apportionment to be 83.87% to TFT and 16.13% to TFSF. The husband argues that he provided the wife and son with a copy of his Application on 27 November 2019, prior to it being filed, seeking their agreement. The Application also sought additional orders for the release of certain funds to the husband and wife. Ultimately, the matter was resolved by consent on 8 May 2020 in substantially the same terms as the Application. The husband’s costs in relation to that Application were $58,862.07. The ultimate apportionment by the single expert was that 38.69% of the proceeds be attributed to the TFSF and 61.31% to the TFT;
(vi) Conduct of the wife in relation to an Application for disclosure filed by her on 28 July 2020. The husband argues that he had complied with his ongoing obligations of disclosure throughout the proceedings as ultimately conceded (in effect) by the wife withdrawing her Application on 4 August 2020. The husband’s costs in responding to the Application were $7,420.51;
(vii) Conduct of the wife and the son in relation to the issue of whether or not the trees had a value separate to the land. The husband maintained they did not and the wife and son maintained they did, despite the evidence from an expert retained by the wife and with whom the son had provided significant instruction, that “… it is not unreasonable to treat the improvements and trees as assets of the Trust and the Fund”. In his oral evidence, the expert confirmed that the trees were not the property of the partnership and had no value separate to the land on which they were planted. The husband’s costs in proving this issue were costs thrown away;
(viii) Conduct of the wife in relation to her return of five items of jewellery including the husband’s late mother’s diamond ring. The husband argues that, prior to trial, the wife had refused to return the jewellery but ultimately agreed to return all but the diamond ring belonging to the husband’s late mother but not until she was in the witness box. The husband’s costs in relation to pursuing this issue were $1,452.41;
(ix) Conduct of the wife and the son in relation to the delayed opening of the TFSF bank account which the husband argues cost the parties more than $6,000 in lost interest;
(x) Conduct of the wife and the son in refusing to admit facts contained in a Notice to Admit Facts filed on 21 January 2020. Ultimately, during cross-examination, the son made concessions about paragraphs (a) – (d), (g), (o), (p), (q) and (r) of the Notice and the husband incurred unnecessary costs of $1,241.15. The wife made concessions about paragraphs (a), (c), (d) and (j) during cross-examination and the husband incurred unnecessary costs of $977.07; and
(xi) Conduct of the wife and son in pressing as a trial issue whether the husband and daughter had received unauthorised distributions and/or engaged in unauthorised transactions which should be adjusted in favour of the wife and/or son. Ultimately, neither the wife nor the son pressed this issue in submissions. The husband incurred unnecessary costs in addressing this issue at trial.
(b) The son was wholly unsuccessful in his claim that the husband had engaged in misleading and deceptive conduct or breached his fiduciary obligations and his application for damages was dismissed;
(c) Offers:
(i) The husband alleges that the parties reached agreement at a mediation in March 2018 which, if proceeded with by the wife and son, would have resulted in the wife receiving 50% of the assets plus the E Holiday Membership and the son would have received his beneficial entitlements in the TFSF and his interest in the partnership;
(ii) On 8 January 2020, the husband made an offer that, if accepted, would have seen the son in the same position as the Court ordered outcome;
(iii) On 11 August 2020, the husband made an offer that, if accepted, would have seen the son receive $150,000 from the TFT and his interest in the partnership and in the TFSF i.e. he would have been better off had he accepted the offer;
(iv) On 1 September 2020 (the 5th day of the trial), the husband made an offer that, if accepted, would have seen the son receive a total payment of $413,305 i.e. he would have been better off had he accepted the offer.
The husband does not specify a fixed sum for the costs sought by him against each of the wife and the son. I assume therefore that he intends his costs will be assessed.
THE WIFE’S SUBMISSIONS
The wife has assumed the husband is seeking costs on an indemnity basis and submits that this is not a case in which indemnity costs should be awarded, “particularly where [the husband] has failed to refer to and consider the factors which might support such an order or any order for costs against [the wife]”.
The wife notes that costs sought by the husband as a consequence of particular Applications that were finalised by order did not reserve costs or adjourn them to the trial Judge. I assume the intention of this submission is to suggest the husband is therefore not entitled to seek costs in relation to those particular Applications. The wife appears to overlook r 19.08 of the Family Law Rules 2004 (Cth) (“the Rules”) which provides that an application for costs may be made within 28 days after the final order is made (and the order made on 12 October 2020 outlined the procedure to be adopted if costs were sought).
The wife disputes that an agreement was reached at mediation.
In relation to the Application filed by the husband on 27 November 2019, the wife submits that she received a letter and the Application from the husband at 10.24am, and at 11.13am on 28 November 2019 she received notice that the Application had been filed on 27 November 2019. In those circumstances, the wife submits that it is disingenuous for the husband to suggest that he had sought the wife’s agreement prior to filing the Application. The wife also argues that the husband also completed an affidavit on 25 November 2019 i.e. prior to agreement being sought from her. Further, it is argued that the Application was brought “in the ordinary course of a proceeding to resolve issues relevant about which the parties were unable to agree and to prepare the matter for trial”. I am not sure what this submission means. The wife also appears to take issue with the amount of time claimed by the husband to have been spent on the Application. I must say 230.7 hours does appear to be rather extraordinary.
In relation to the jewellery, the wife addresses only the diamond ring formerly belonging to the husband’s mother and contends that the wife “maintained correctly that the ring was hers which was correct on the documentation”. It is not clear to me what “documentation” made this correct. The ring was left to the daughter. The daughter relinquished her entitlement to the ring during a dispute between the husband and his siblings about the will. The husband ultimately paid the estate for the ring.
In relation to the appointment of a Trustee for Sale, the wife argues that she did not see a need for the appointment of the Trustee and in circumstances where the husband had not appealed against the order made on 27 August 2018, she was entitled to bring an application for enforcement.
The wife submits that she discontinued her Contravention Application filed 20 November 2018 so as to preserve the trial dates. Further, the wife argues that there was no order for costs, reserving costs or adjourning the costs in the orders made on 9 July 2020 and 15 July 2020. I have already made reference to r 19.08 in relation to this submission.
The wife submits that the expert retained by her assigned a value to the improvements on the N Town land “including a value for the trees”. Further, that the husband submissions “ignore this reality and the reality that the ultimate apportionment of the sale proceeds was conducted by virtue of the very report not referred to by the [husband]”. I am unclear what this submission means but assume it refers to the percentage apportionment of the sale proceeds as between the TFSF and the TFT as described by the husband.
The wife submits that not only was there no agreement at mediation but, even if there had been, the wife received a better outcome at trial.
THE SON’S SUBMISSIONS
The son’s submissions helpfully address the power to make a costs order in circumstances arising out of a claim brought other than pursuant to a provision in the Family Law Act 1975 (Cth) (“the Act”) and cites an earlier decision of mine, namely, Costigan & Costigan and Ors (No 2) in which I reviewed the relevant authorities on this issue and concluded at [59]:
59. In my view the jurisprudence in relation to this issue has developed since Skinner such that the phrase ‘proceedings under this Act’ is now given a much wider meaning. Where once it was thought that s 117 applied only where a costs application arose out of a claim brought pursuant to a provision of the Act, it is now apparent that it applies in any case where the Court is called upon to exercise its original jurisdiction in a single matter before it, whether that involves an exercise of its ‘implied’ powers, accrued jurisdiction or a determination of whether it has jurisdiction at all.
It seems common ground that s 117 of the Act applies to the claim for costs as against the son although the husband does not address this in his submissions.
The son draws the Court’s attention to the financial disparity between the husband and wife on the one hand and the son on the other. In particular, the son resists a costs order by reason of the following:
(a) The son paid $887,000 to the husband and to the TFSF under the de facto control of the husband;
(b) The whole of that investment has been lost save for his quarter share in the partnership and his beneficial entitlements in the TFSF;
(c) As a result of the COVID-19 pandemic he has been made redundant and as his only experience relates to his work overseas, his job prospects clearly poor;
(d) The poor financial circumstances of the son are demonstrated by his inability to engage counsel for the trial;
(e) He has been “financially exhausted” by the litigation to which he was joined;
(f) He did not receive any interim distributions from the partnership to pay any of his legal costs unlike the husband and the wife;
(g) In the November 2014 emails referred to in the Reasons for Judgment delivered 12 October 2020 at [93], the son was clearly concerned to ensure he and his family had a home in Australia in the event he was injured in an accident. The husband declared it as a non-issue, because retention of the N Town property was a fall-back position for the family income in such a scenario and was contemplated when the property was originally acquired; and
(h) The N Town property has now been sold and there is no longer any income.
The son challenges the husband’s submission that the son’s conduct warrants a costs order and argues that he did not engage in any unreasonable conduct.
In particular, the son disputes that any action taken by him prior to the making of the order dated 27 August 2018 (although not uploaded to the portal until 24 September 2018) was improper and contends that his communication with the judge’s associate (as directed by the judge) was sent simultaneously to the other parties, including the husband. The husband had an opportunity to take issue with the order sought by the son and indeed did communicate with the associate on 3 September 2018 seeking to correct errors contained in the son’s communication. The husband did not pursue his challenge about the circumstances in which the order was made despite having the opportunity to do so. In relation to the application filed on 21 November 2018, the son points out that the terms of the order made by consent were different to the terms sought in the Application. The Contravention Application filed by the son was only withdrawn when informed by the Registrar that, if pursued, the trial dates would be vacated. The terms of the order made by consent on 8 May 2020 were not in the same terms as sought by the husband in his Application filed 27 November 2019. Agreement was reached only after lengthy negotiation. The husband historically held the view that the trees had a separate value to the land but changed his view. In any event, the son submits this issue was not “a pivotal question on which the proceedings were determined”. The delay in establishing the TFSF bank account primarily related to the husband’s attempts to control the funds. The son submits the Notice to Admit Facts was not one served in accordance with the Rules as it was directed to two parties and, in any event, there is no justification for the quantum claimed. The alleged unauthorised use of funds by the husband was relevant to the son’s claims against the husband, although the subject of a separate issue.
The son submits that it is the husband who prolonged proceedings and made matters more difficult than they should have been. The son submits that in circumstances where the proceedings were complex, involving four family members over many years and a complex web of related entities:
(a) The uncooperative attitude of the husband substantially increased the costs incurred for the parties, particulars of which include:
(i) The failure to acknowledge the son’s contribution to the family business until a written offer mid-way through the trial and the requirement to defend multiple applications by the husband over two and a half years;
(ii) The refusal of the husband to sign agency appointments to effect a sale of the properties ultimately resulting in the appointment of a Trustee for Sale;
(iii) A further Application was necessary to prevent the husband causing only his nominated agent to be used in the sale process;
(iv) The volume of correspondence between the husband and the Trustee for Sale resulted in the Trustee commenting that this was the most expensive trusteeship he has ever been involved with;
(v) The husband incurred expenses in drafting court material prior to seeking agreement e.g. the Application filed by the husband on 27 November 2019, on the same day as he purported to seek agreement as to its contents without waiting for a response. The husband’s claim includes 230.7 hours in preparation and costs of $58,862.07 in relation to one Application;
(vi) The husband would not agree to the son and his solicitor appearing by video link at the trial in circumstances of a global pandemic restricting entry into Australia and Queensland, necessitating an Application to which the husband ultimately consented; and
(vii) Even after the trial, the husband’s attitude in refusing the son’s request to extend the time for filing his submissions in relation to costs necessitating the relisting of the matter, and the husband’s ultimate agreement late on the afternoon prior to the relisting date.
The son submits that the husband, the wife, and their respective solicitors, in addition to the non-compliant daughter, contributed to a waste of money on legal costs out of all proportion to the pool of assets about which the family was in dispute.
The son challenges the husband’s submission that he was wholly unsuccessful in the proceedings noting that he retains his one quarter interest in the partnership assets and his beneficial entitlements in the TFSF. The husband did not amend his Response to reflect such an outcome until 21 August 2020 by which time substantial costs had already been incurred. The son received a better outcome than proposed by the husband up until 21 August 2020.
The son submits that the husband has had the benefit of substantial funds from the partnership to pay his legal costs, disbursements, and valuations. The son received no such benefit.
In relation to offers, the son contends that “all of the offers of the husband were to the [wife] and the [son] and there were no offers to the [son] individually”.
The son submits that any attempt to assess the costs claimed against the son “would be an impossible task” given the extent to which the issues were interwoven.
HOW COSTS applications ARE DETERMINED
Parties in this jurisdiction generally bear their own costs (s 117(1) of the Act) but the Court has a wide discretion to make such order as to costs as the Court considers just where there are circumstances that justify it in doing so (s 117(2)).
An applicant for costs bears no “additional or special onus” other than the establishment of “justifying circumstances”.
In exercising the discretion to make a costs order, the following factors must be taken into account, where relevant (s 117(2A)):
(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.
It is sufficient for one factor in s 117(2A) to be present.
Rule 19.18 empowers the Court, when awarding costs, to make an order for costs:
(a) of a specific amount;
(b) as assessed on a particular basis (e.g. lawyer and client, party/party or indemnity);
(c) to be calculated in accordance with the method stated in the order; or
(d) for part of the case, or part of an amount assessed in accordance with Schedule 3.
In considering what specific order should be made, the same rule provides that the Court may consider any of the following factors:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer’s conduct has been improper or unreasonable;
(e) the time properly spent on the case, or in complying with pre-action procedures; and
(f) expenses properly paid or payable.
discussion
The husband’s written submissions are a little confusing. The introductory paragraph of his submissions state that his submissions are filed in support of his application that the wife and son “pay his legal costs”. Later in his submissions he refers to the “costs for which the [husband] may claim” and sets out his costs calculated “according to the scale” from either March 2018 (when the parties attended a mediation and allegedly agreed to resolve the matter) or, alternatively, from January 2020 (when the husband made an offer to settle). The costs claimed from the earlier date are calculated in accordance with the “scale” and total $214,513.75 and from the later date total $134.015.08. Then, in the final paragraph of his submissions, the husband seeks the order set out earlier in these reasons at [7]. So, it appears the application for costs as against the wife relates only to the applications or issues identified therein. It was also not entirely clear whether the husband was seeking his costs on an indemnity basis or some other basis. However, given the reference in his submissions to the “scale” and the calculation of some of his costs on that basis, I have proceeded on the basis that the husband is seeking costs on a party and party basis. I also make this assumption because the husband makes no reference, in his submissions, to the matters required to be addressed when applying for costs on an indemnity basis.
In any event, I do not consider that the circumstances of this case justify a costs order against either the wife or the son for the following reasons:
(a) The financial circumstances of the husband and wife are superior to those of the son who was made redundant during the COVID-19 pandemic;
(b) I do not regard the conduct of the son or the wife to warrant a costs order against either of them. These were complex proceedings and the attitudes of all parties at times contributed to delay and costs;
(c) While the son’s claim was dismissed, he did achieve the return of a quarter interest in the remaining partnership assets and his beneficial entitlements in the TFSF, an outcome not conceded by the husband until late in the proceedings;
(d) The ‘offer’ made to the wife at mediation (it being in dispute that any agreement was reached) would have resulted in a worse outcome than she achieved at trial; and
(e) The offers made to the son were not made to him individually and thus not capable of acceptance by him.
Accordingly, there will be no order for the payment of costs.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew.
Associate:
Dated: 21 December 2020
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