Townend v Townend and Anor (No.2)
[2008] FMCA 1612
•23 December 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TOWNEND v TOWNEND & ANOR (No.2) | [2008] FMCA 1612 [2008] FMCAfam 1299 |
| COSTS – Claim for indemnity costs of family law proceedings – claim for costs of bankruptcy proceedings – considerations relevant to the assessment of costs – no opportunity to consider merits of unsuccessful claim – award of costs not appropriate. |
| Bankruptcy Act 1966 (Cth) Family Law Act 1975 (Cth), s.117 |
| Re Minister for Immigration; ex parte Lai Qin (1997) 186 CLR 622 Townend v Townend & Anor [2008] FMCA 1610; [2008] FMCAfam 1298 |
| Applicant: | JOYCE MARY TOWNEND |
| First Respondent: | MILES HAMILTON TOWNEND |
| Second Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File Number: | SYC 6330 of 2007 SYG 1919 of 2008 |
| Judgment of: | Driver FM |
| Hearing date: | 1 December 2008 |
| Delivered at: | Sydney |
| Delivered on: | 23 December 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr D Dura |
| Solicitors for the Applicant: | Gray & Perkins |
| Counsel for the First Respondent: | Mr D Jarrett |
| Counsel for the Second Respondent: | Mr J Johnson |
| Solicitors for the Second Respondent: | Sally Nash & Co |
ORDERS
There be no order as to costs as between the Official Trustee in Bankruptcy and Mr and Ms Townend in relation to the proceedings under the Family Law Act 1975 (Cth).
The Official Trustee’s costs of the proceedings under the Bankruptcy Act 1966 (Cth) be costs of the administration of the estate.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 6330 of 2007
SYG 1919 of 2008
| JOYCE MARY TOWNEND |
Applicant
And
| MILES HAMILTON TOWNEND |
First Respondent
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Second Respondent
REASONS FOR JUDGMENT
Introduction and background
On 1 December 2008 I dismissed proceedings instituted by Ms Townend under the Family Law Act 1975 (Cth) (“the Family Law Act”) against the Official Trustee in Bankruptcy. Proceedings under that Act between Mr and Ms Townend have settled. Other proceedings under the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) between the parties were resolved by consent orders. The only issue remaining to be resolved is what, if any, order should be made in relation to the costs of the proceedings under the Family Law Act and the Bankruptcy Act.
The trustee seeks his costs of the proceedings, including indemnity costs against Ms Townend. In my principal judgment[1] at [9] I said that I would defer consideration of the issue of costs until completion of the proceedings between all of the parties.
[1] Townend v Townend & Anor [2008] FMCA 1610; [2008] FMCAfam 1298
Consideration
The terms of settlement as between Mr and Ms Townend in respect of their proceedings under the Family Law Act included an order that there be no order as to costs of those proceedings as between the husband and the wife. Accordingly, there will be no order as to costs in relation to those proceedings.
The consent orders I made in relation to proceedings instituted by the Official Trustee against Ms Townend under the Bankruptcy Act were as follows:
1.A declaration that the property at 84 Maxwell Street, Turramurra being folio identifier 143/16227 (“the Property”) is held and presently vested in the following proportions:-
(a) 50% to the Applicant
(b) 50% to the First Respondent,
as tenants in common in equal shares.
2.The Court notes that, as between the Applicant and the First Respondent it has been agreed that:
(a)the value of the interest of the Applicant in the Property taking into account prior encumbrances is $108,898.25;
(b)the First Respondent shall be entitled to acquire the interest of the Applicant in the Property for a consideration of $108,898.25 such consideration to be paid on or before 31 March 2009, provided that if payment is not made by 30 January 2009 the First Respondent shall pay in addition to the amount of $108,898.25 and as part of the consideration for the acquisition of the interest of the Applicant in the Property an amount of interest calculated at the rate of 10% per annum calculated on a daily basis (simple interest basis) until the date of payment; and
(c)at the time of payment of the amount referred to in paragraph (b) above the Applicant shall deliver to the First Respondent or as she may direct in writing a memorandum of Transfer, except in respect of the payment of stamp duty, and Withdrawal of Caveat lodged by the Applicant, otherwise in registrable form in respect of the interest of the Applicant in the Property.
3.Orders, in the event of the First Respondent not complying with the terms of the agreement noted by the court in paragraph number 2 above:-
(a)that Robert John Cruickshanks, a Deputy Official Receiver and Philip Madden, a Senior Assistant Official Receiver, both of Level 4, 201 Elizabeth Street, Sydney in the State of New South Wales, be appointed joint and several trustees (“the Trustees”) for the sale of the land at 84 Maxwell Street, Turramurra, being the whole of the land contained in Folio Identifier 143/16227 (“the Property”).
(b)that the Property vest in the said Robert John Cruickshanks and Philip Madden, subject to any encumbrances affecting the entirety thereof and free of any encumbrances affecting any undivided shares therein be held upon a trust for sale in the same terms as provided for a Statutory Trust for Sale in Division 6 of Part IV of the Conveyancing Act, 1919 (NSW).
(c)that the Trustees be empowered to offer the Property for sale and to sell the Property by public auction with power to fix a reserve price, or alternatively, to sell the Property by private treaty at the best available price.
(d)that any sale by the Trustees may be made to the Applicant either as a result of sale at auction or by private treaty, without the requirement for the payment of a deposit (other than an amount of $1.00) and upon such terms as to the payment of the balance of the purchase price as the Trustees consider appropriate.
(e)that the Trustees be empowered and authorised to obtain a valuation of the Property by employing a registered valuer for the purposes of determination of a fair and reasonable price of the Property the purposes of the performance of their duties as Trustees for Sale.
(f)that after sale of the Property at auction or by private treaty, the said Trustees be empowered to deduct from the proceeds of sale:-
(i) the commission and other reasonably incurred expenses of any real estate agent employed by the Trustees;
(ii) the remuneration and expenses of the Trustees in respect of the sale;
(iii) the legal expenses of transferring the land to the purchaser.
(iv) the legal expenses of these proceedings, if any;
(v) any taxes including but not limited to Capital Gains Tax, Land Tax and Goods and Services Tax (GST);
(vi) to make all necessary adjustments of rates and taxes on settlement of the sale;
(vii) Insurance and any other reasonable expenses for protection and maintenance of the property; and
(viii) the amount of $432,203.50 being the amount paid by Paul Grech and Amelia Roberts in satisfaction of the Mortgage registered upon the Property in favour of Secure Funding Pty Limited.
(g)that the Trustees pay their remuneration and the Applicant’s costs, if any, out of the proceeds of sale, prior to any payment to either the Applicant or First Respondent and the Trustees for Sale shall be entitled to be remunerated on the basis of their fees calculated under the Bankruptcy Regulations.
(h)that the Trustees hold the proceeds of sale (after deduction of the expenses in paragraph (f)) on trust for the Applicant in its capacity as Trustee of the Property of Miles Hamilton Townend, a bankrupt and for the First Respondent and to pay to them such balance as follows:
(i) to the Applicant – an amount of $108,898.25 together with the additional amount calculated at the rate of 10% per annum upon such moneys from 30 January 2009 to the date of payment; and
(ii) to the Second Respondent – the balance.
(i)that vacant possession of the Property be given by both the First and Second Respondents on or before 14 April 2009.
(j)that the Trustees be at liberty to seek further directions or orders from the Court on any matter arising from their appointment or these orders.
(k)that a Writ of Possession be issued in respect of the Property 14 days after order 3 taking effect.
4.That, in the event that the First and/or Second Respondents are in possession of the Certificate of Title for the Property and Discharge of Mortgage AA709062, the First and/or Second Respondent shall produce to the Trustees the Certificate of Title for the Property and Discharge of Mortgage AA709062 on or before 31 March 2009.
5.The Court notes that the Respondents confirm that they are unaware of the location of the certificate of title for the Property and any discharge of the mortgage with Secure Funding Pty Limited and are not in possession of those documents. The First respondent shall not require the Applicant or the trustees for sale to deliver the certificate of title or any discharge of the mortgage with Secure Funding Pty Limited upon completion on or before 31 March 2009 or, if the First respondent is the purchaser from the trustees for sale upon completion of any such sale.
6.It is noted that the issue of the costs of these proceedings will be the subject of a determination by the Court.
In my view, the effect of order 3(f)(iv) is to enable the Official Trustee to recover his costs of the proceedings under the Bankruptcy Act from the sale proceeds of the matrimonial home. No further order is required, other than to confirm that outcome.
That leaves the issue of costs of the Official Trustee in respect of the proceedings instituted against him under the Family Law Act. Those proceedings were dismissed on the basis of a lack of jurisdiction. The Trustee’s claim for indemnity costs against Ms Townend arises from a series of Calderbank offers in relation to Ms Townend’s claim against the Official Trustee. I have evidence of those offers before me. Those offers included an offer of 60% of the net proceeds of the sale of the home, and an offer for Ms Townend to purchase the Official Trustee’s share of the property for as little as $70,000. The submission of the Official Trustee is that he should receive his costs of the family law proceedings on an indemnity basis because, if the Calderbank offers had been accepted, Ms Townend would have done better than she did upon the dismissal of the proceeding against the Official Trustee under the Family Law Act and the ultimate settlement of the proceeding against Ms Townend under the Bankruptcy Act.
I accept that Ms Townend would have achieved a greater share of the proceeds of the sale of the matrimonial home if she had accepted the best of the Calderbank offers made by the Official Trustee but I do not accept that the result should be a costs order, let alone an indemnity costs order. Account must be taken of the terms of s.117 of the Family Law Act which provides:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118[2], each party to proceedings under this Act shall bear his or her own costs.
[2] none of which are presently relevant
(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) 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.
(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.
(3) To avoid doubt, in proceedings in which an independent children's lawyer for a child has been appointed, the court may make an order under subsection (2) as to costs or security for costs, whether by way of interlocutory order or otherwise, to the effect that each party to the proceedings bears, in such proportion as the court considers just, the costs of the independent children's lawyer in respect of the proceedings.
(4) However, in proceedings in which an independent children's lawyer for a child has been appointed, if:
(a) a party to the proceedings has received legal aid in respect of the proceedings; or
(b) the court considers that a party to the proceedings would suffer financial hardship if the party had to bear a proportion of the costs of the independent children's lawyer;
the court must not make an order under subsection (2) against that party in relation to the costs of the independent children's lawyer.
(5)In considering what order (if any) should be made under subsection (2) in proceedings in which an independent children's lawyer has been appointed, the court must disregard the fact that the independent children's lawyer is funded under a legal aid scheme or service established under a Commonwealth, State or Territory law or approved by the Attorney-General.
Ms Townend is a woman of limited means, although she is not in receipt of Legal Aid. Her conduct of the proceedings has been proper and reasonable. There has been no material failure to comply with court orders. Ms Townend has been wholly unsuccessful in her claim against the Official Trustee, but only because of a lack of jurisdiction. While favourable offers were made by the Official Trustee, it cannot be assumed that 50% of the net proceeds of the sale of the property next year will be a worse result than 60% of the net proceeds of the sale of the home in 2008. Ms Townend could have purchased the Official Trustee’s share of the property for significantly less than what she will now have to pay – but it cannot be assumed that Ms Townend had the means or the inclination to take up the offer made.
As noted above, the proceeding against the Official Trustee under the Family Law Act failed for lack of jurisdiction. The merits of Ms Townend’s claim were never dealt with. The Trustee had filed a response to that claim in which he conceded that Ms Townend should receive a significantly higher proportion of the equity in the matrimonial home than her existing legal entitlement. The Official Trustee, by claiming only a 40% interest in the property, effectively conceded an adjustment of property interests in favour of Ms Townend of 10%. Also, during oral argument in relation to costs, counsel for the Official Trustee properly referred me to the decision of McHugh J in Re Minister for Immigration; ex parte Lai Qin (1997) 186 CLR 622 at pages 624-5 where his Honour said:
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes omitted)
I am satisfied that the proceeding against the Official Trustee was reasonably instituted by Ms Townend under the Family Law Act. That proceeding ultimately became futile because of a lack of jurisdiction. The proper result should be that there should be no order as to costs of that proceeding. I will so order, so as to preserve the rights of the parties.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 23 December 2008