TRITTON & DUCATTI
[2020] FamCA 392
•25 May 2020
FAMILY COURT OF AUSTRALIA
| TRITTON & DUCATTI | [2020] FamCA 392 |
| FAMILY LAW – PROPERTY – Costs – Where the husband and second respondent primarily seek costs on an indemnity basis – Consideration of ss 117(1) and 117(2) of the Family Law Act 1975 (Cth) and the differing position of the husband and second respondent in relation to the considerations in a costs application – Wife’s conduct and imprudent refusal to accept offers of settlement significant factors in the determination of the quantum and basis of costs ordered to be paid – Wife ordered to pay second respondent’s costs on an indemnity basis from 27 September 2017 being the date of the second respondent’s offer of settlement – Wife ordered to pay husband’s costs assessed at 50% of costs billed from 18 November 2018 being the date of his first offer of settlement. |
| Family Law Act 1975 (Cth), ss 117(1), 117(2) Family Law Rules 2004 (Cth) r 19.8(1)(a) |
| Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70 Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116 Moorcroft & Moorcroft [2017] FamCAFC 147 Munday v Bowman (1997) FLC 92-784 Penfold & Penfold (1980) 144 CLR 311 Phillips & Hansford [2020] FamCAFC 28 Sfakianakis & Sfakianakis [2019] FamCAFC 54 Smith & Fields (Third Party Costs) [2013] FamCA 505 Worth & Worth and ICL (No. 2) [2019] FamCFC 126 |
| APPLICANT: | Mr Tritton |
| RESPONDENT: | Ms Ducatti |
| SECOND RESPONDENT: | Mr E Tritton |
| FILE NUMBER: | SYC | 6271 | of | 2016 |
| DATE DELIVERED: | 25 May 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Henderson J |
| HEARING DATE: | 13 February 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Harper |
| SOLICITOR FOR THE APPLICANT: | Holmes Donnely & Co Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Othen |
| SOLICITOR FOR THE RESPONDENT: | Douros Jackson Lawyers |
| SOLICITOR FOR THE SECOND RESPONDENT: | York Law Family Specialists |
Orders
The wife to pay the second respondent’s costs on an indemnity basis in the sum of $148,783.46.
The wife to pay the husband’s costs assessed in the amount of $69,855.
The husband may reduce monies to be paid to the wife pursuant to Orders made by the Court on 20 September 2019 by an amount of $218,598.46 to satisfy Orders 1 and 2 herein.
Upon the husband exercising the option in Order 3 herein he is to pay to the second respondent the sum of $148,783.46 or as he may direct with the balance to be retained by the husband to satisfy the Costs Order made in his favour.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tritton & Ducatti has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
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 r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6271 of 2016
| Mr Tritton |
Applicant
And
| Ms Ducatti |
Respondent
And
| Mr E Tritton |
Second Respondent
REASONS FOR JUDGMENT
This is an application by the husband and his father, the second respondent for their costs in property proceedings finalised by way of final judgment delivered on 20 September 2019. The totality of the proceedings heard combined both property and parenting. The costs sought are in relation to the property proceedings only.
The commonality of the husband and his father's cost application is that they seek costs, effectively, from almost the commencement of the proceedings, and seek those costs on an indemnity basis. The proceedings commenced for the husband in September 2016 and for the second respondent in January 2017.
An additional commonality of the husband and his father’s cost application is that almost all relevant factors under section 117(2) of the Family Law Act (“the Act”) are enlivened in this matter.
They include:
a)The conduct of the wife;
b)Offers of settlement or compromise made throughout the proceedings and from an early stage;
c)The financial circumstances of the parties; and
d)Whether a party, being the wife, was wholly unsuccessful in her case.
Primarily, the husband seeks the following:
a)His costs on an indemnity basis in the sum of $201,764.10.
b)In the alternative, costs incurred to 5 November 2018 (except those costs incurred for preparation and attendance at the interim hearing on 2 November 2018) - 50% per cent of his costs agreed or assessed on a party/party basis.
c)For the costs incurred in preparation for an attendance at the interim hearing on 2 November 2018, as agreed or assessed, on an indemnity basis.
d)Otherwise 50% of his costs, as agreed or assessed on an indemnity basis.
Primarily, the second respondent seeks the following:
a)That his costs be paid in their entirety on an indemnity basis in the sum of $229,553.
b)In the alternative, costs fixed on a solicitor/client basis in the sum of $172,164.
c)Thirdly, his costs be paid on a party/party basis a figure of $149,209.
d)Finally, the second respondent seeks to secure payment of his costs by the wife by way of deducting that sum from the monies the husband is to pay her pursuant to the orders of 20 September 2019 and this is agreed by the husband.
The wife primarily seeks all costs application be dismissed.
If not dismissed, in the alternative, that the wife pay the husband and second respondent’s costs at scale in accordance with Schedule 3, and those costs be further limited to 24% of the costs so assessed.
DOCUMENTS RELIED UPON
The husband's Application in a Case is supported by an Affidavit of 7 February 2020 and voluminous annexures, together with an Affidavit of 18 October 2019.
The second respondent’s Application in a Case is supported by an Affidavit filed 11 October 2019 and annexures thereto.
The wife's response is contained in her Response filed 28 January 2020, an Affidavit in support of the same date and voluminous annexures.
In addition to the detailed accounts rendered by the husband and second respondent’s lawyers contained in their material, on 29 April 2020 in open Court conducted via Microsoft Teams and whilst the wife was present, I requested that the second respondent provide me his actual costs incurred from 27 September 2017, the date of the offer he proffered for the Conciliation Conference which was held the following day. This document was sent to the wife. I have received that document and marked it second respondent’s exhibit 1. Those costs amount to $148,743.65. I have received no response or argument from the wife as to the schedule of costs.
For the husband, I requested he provide me his actual costs incurred from 18 November 2018. This document was also to be sent the wife. I have received that document and marked it husband’s exhibit 1. Those costs amount to $133,611.31. I have received no response or argument from the wife as to the schedule of costs. These snapshots have assisted me in my deliberations.
THE EVIDENCE
A relevant factor in any cost application is that I must have regard to the quantum of costs sought to be paid. This is particularly heightened in this matter where quantum of costs on an indemnity basis would almost subsume the verdict awarded to the wife. Even on a party/party basis the costs could approach could approach 30% of the verdict awarded to the wife.
By my orders of 20 September 2019 the wife was to receive the sum of $513,800 and retain ownership of a property owned by her prior to the commencement of the relationship in Melbourne in which she has an equity of some $80,000.
Rule 19.8(1)(a) of the Family Law Rules 2004 (Cth) (“Family Law Rules”) permits the Court to order costs in a specific amount and this is the Order the respondents seek in the event I determine this is a more appropriate course than the award of indemnity costs. There is much force in the submission that I should assess the costs to be awarded to the husband and second respondent if any, as my concern is that if I do not do so this litigation may never end. It is an imperative to henceforth minimise costs and end his litigation for the parties.
The purpose of this rule is practical. It is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation, as referred to by their Honours in the decision Rankin & Rankin (No. 3) at paragraph [19].[1]
[1] Rankin & Rankin (No. 3) (2019) FamCAFC 133 at [19].
In this decision, their Honours held that they were satisfied that the respondent's schedule of costs filed, read with their respective written submissions, provided sufficient material to enable the Court to justly fix a sum for costs in accordance with the rule and principles as to its application, and they relied upon the decision of Moorcroft & Moorcroft[2] to support this realistic and practical approach. Although I accept their Honours' statement in Rankin & Rankin (No. 3) at paragraph [23] relates to costs in an appeal, there is no impediment to the application of this principle to costs sought in a first instance trial.
[2] Moorcroft & Moorcroft [2017] FamCAFC 147.
The Court further said that a Court is not obliged nor should it attempt something akin to a taxation of costs as might be undertaken by an assessor. As I read this decision, only if the parties have provided sufficient particulars of the costs claimed, and there has been a sufficient challenge to the costs claimed, would the Court been a position to assess the costs. I find the careful and thorough schedule of costs provided by the husband and his father based upon costs charged in accordance with a cost agreement, the breakup of the cost for specific dates and particular applications, excising the costs for the parenting aspect of the matter by the husband, an aspect of the matter that was not involved lengthy or costly, together with the extensive and voluminous annexures, the case outlines filed by all parties, the alternatives provided to an indemnity costs Order, and the oral arguments heard by not only the applicants but also the respondent wife have given me sufficient evidence to embark upon an assessment of costs if that be the course I determine is proper.
The consequences for the wife of a finding in favour of the applicants are very serious. Pursuant to my Orders, the wife received a sum of $513,800. If I accede to the indemnity costs application by the husband and his father, this will subsume almost the entirety of the wife's verdict. Any costs Order is a matter of concern to the wife. The outcome of this application is a matter of extreme importance to the wife and her financial future.
I have determined to deal with the application for costs by the second respondent, Mr Tritton Senior (“Mr E Tritton”), initially and separately to that of his son. Mr E Tritton is a stranger to this marriage and his involvement in these proceedings is on a vastly different footing to that of the husband and wife.
THE LAW
Going out to the law and Section 117(2) of the Act which relates to costs is as follows:
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to the proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of the opinion that there are circumstances that justify it in doing so, the court may, subject to sections (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.
(2A)In considering what order (if any) should be made, 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 a failure of a party to comply with previous orders of the court;
(e)whether any party 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.
I must first determine whether I would exercise my discretion to make an Order for costs pursuant to section 117(1) of the Act. If I determine that I should exercise that discretion, I must then determine the costs to be paid.
The power to award costs involves a wide exercise of discretion and the breath of that discretion is not limited as was recognised in a matter of Penfold & Penfold.[3] The Court need not be satisfied that all the factors under section 117(2)(A) have occurred before making a costs order, rather the Court is required to find a justifying circumstances or circumstances as an essential preliminary step before making any costs Order.
[3]Penfold & Penfold (1980) 144 CLR 311.
There is voluminous authority from the Full Court of the Family Court and in other jurisdictions in relation to costs and, in particular in relation to indemnity costs. Decisions such as Kohan & Kohan[4] are still good authority in relation to the Court’s discretion to award indemnity costs and the factors which may weigh upon a judge’s exercise of the discretion to so do.
[4] Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116.
Three recent decisions of Phillips & Hansford,[5] Rankin & Rankin (No. 3),[6] Worth & Worth and ICL (No. 2),[7] and Sfakianakis & Sfakianakis,[8] were brought to my attention as they all deal with the broad discretion of the Court in relation to a costs application. The power is to award costs on an indemnity basis, solicitor/client basis, party/party basis, scale costs, costs as assessed by the Court or a taxation by a Registrar. As always in family law proceedings, each case turns on its particular and unique facts.
[5]Phillips & Hansford [2020] FamCAFC 28.
[6] Above note, 1.
[7]Worth & Worth and ICL (No. 2) [2019] FamCFC 126.
[8] Sfakianakis & Sfakianakis [2019] FamCAFC 54.
At the outset, I have formed the view that the usual rule of each party bearing their own cost would not be appropriate, if for no other reason than the following and where there are a multitude of compelling reasons to exercise my power to make a costs Order.
The second respondent made and offer of settlement to the wife the day prior to the conciliation conference held in September 2017.
Had the wife accepted the second respondent’s offer of settlement in September 2017, this would have resulted in the dispute being between her and her husband only, and the second respondent would have no longer been involved. The matter would then have proceeded on a proper basis, being the determination as between the husband and wife of their respective entitlement to the husband’s interest in the properties at Suburb G and Suburb D. This offer was not accepted by the wife.
The husband made 2 offers of settlement in November 2018 and May 2019 to the wife, both of which would have put her in a better financial position than the verdict I awarded her. These offers of settlement, had they been accepted by the wife, would have also minimised costs for all parties.
Further, had the wife agreed with the position the husband put in his initial application in 2016, namely that the wife transfer the properties to he and his father as tenants-in-common, the dispute then would have been between he and his wife as to their interest in his entitlement to the those properties and would not have involved a third party. Accepting this position as a way of continuing the dispute would also have been more advantageous to the wife and it was consistent with the position of the second respondent from the commencement of the proceedings.
Having determined to exercise my discretion to consider a costs application, I will go to the principles that apply to the various costs Orders I may make pursuant to my power under section 117(2) of the Act.
Both the husband and his father seek indemnity costs as their primary application and although such costs are only ordered in exceptional circumstances, this is a matter where those exceptional circumstances exist.
The matters of Kohan & Kohan[9] and Smith & Fields (Third Party Costs)[10] dealing with third party costs are all authority for this proposition. The category of cases in which indemnity costs may be awarded are not closed. Costs on this basis have been ordered in matters where an application is pursued with wilful disregard of known facts or clearly established law, where there has been an imprudent refusal of an offer to compromise, as in the decision of Colgate-Palmolive Co v Cussons Pty Ltd (“Colgate-Parmolive”).[11]
[9] Above note, 4.
[10] Smith & Fields (Third Party Costs) [2013] FamCA 505.
[11] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801.
In relation to pursuing an application with wilful disregard to known facts or clearly established law, the decisions of Phillips & Hansford,[12] Rankin & Rankin (No. 3),[13] Worth & Worth and ICL (No.2)[14] and Sfakianakis & Sfakianakis,[15] reiterate that indemnity costs may be awarded where the applicant properly advised should have known he had no chance of success and where a party persists in what should, on a proper consideration, be seen to be a hopeless case.
[12] Above, note 5.
[13] Above, note 6.
[14] Above, note 7.
[15] Above, note 8.
This principle was referred to by his Honour Justice French in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2).[16]
[16] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70.
In Worth & Worth and ICL (No.2),[17] their Honours quoted from Justice Holden’s decision in Munday v Bowman,[18] where the Court drew the following principles relevant to costs:
a)Where it appears that an action has been commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success, in such cases, the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts;
b)Making allegations of fraud knowing them to be false or making of irrelevant allegations of fraud;
c)Evidence of particular misconduct causing loss of time to the Court and to other parties;
d)The making of allegations which ought never to have been made, or the undue prolongation of a case by groundless contentions; and
e)An imprudent refusal of an offer to compromise.
[17] Above, note 7.
[18] Munday v Bowman (1997) FLC 92-784.
As their Honours quote in Worth & Worth and ICL (No.2),[19] from Sheppard J in Colgate-Palmolive: [20]
In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course.
[19] Above, note 7.
[20]Above note, 11.
It is trite to say that the evidentiary onus is upon the husband and his father to satisfy me, using Sheppard J’s words, “that the circumstances of the case must be such as to warrant the court in departing from the usual course”.[21]
[21]Above note, 11.
The options available to me in determining the cost order to be made are ; fixed costs at scale , or party/party costs, or solicitor/client costs, or as assessed by me in the exercise of my discretion or on an indemnity basis.
Their Honours say in Sfakianakis & Sfakianakis,[22] at paragraph 9:
The ordinary position in proceedings under the Family Law Act is that each party is to bear his or her own costs (117.1). Where the court is of the opinion that circumstances justify it in doing so, the court may make such order as to costs as it considers just. Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional.
[22] Above, note 8.
Paragraph 10:[23]
It is, however, a mistake to think that if a costs order is made that that order can only be on a party and party basis or on an indemnity basis. The words "such order as to costs as the court considers just" permit the court to fashion an order that is apt to the circumstances. One such well-known example is assessment on a trustee basis, which is more generous than party/party costs but falls short of an indemnity. Orders for partial indemnity or for a particular period are obvious possibilities. The court may also fix costs in a particular sum, taking into account all relevant circumstances. That type of order, too, is neither one for party and party costs, nor an indemnity costs order. For convenience in these reasons, we shall refer to such orders as "special costs orders".
[23] Above, note 8.
As there Honours opine, there is a broad discretion in the making of a costs Order. The husband urges upon me to make a special costs order if I do not accept his primary position of an indemnity costs order and seeks 50% of costs paid from a particular date. The second respondent seeks solicitor/ client or then party /party costs if I do not accept his primary position of indemnity costs.
Going now to the facts as set out in the Affidavit material before me and having regard to the judgment I delivered on 20 September 2019.
The wife was wholly unsuccessful in her claim against her former father-in-law that she and her husband owned, at law and equity, the properties at Suburb D and Suburb G, and that he had no interest or equity in those properties. Secondly that he had committed a fraud on the partnership between him and his son in relation to drawings and use of partnership profits for his personal gain.
It is correct that the legal title to both properties is in the wife’s name. It was the contention of the second respondent, the wife's father-in-law, that he and the husband had an equal equitable interest in the properties at Suburb D and Suburb G by way of their partnership, and that his entitlement was 50% and his son’s entitlement was 50%. This resulted in his son and wife owning together 50% of the net equity in those properties.
The husband agreed with his father’s position.
The husband commenced these proceedings in September 2016. His position was that at that time, he pay the wife a sum of money $735,000, and that she indemnify her husband and his father in relation to future tax liabilities, Capital Gains Tax, and the like. On payment of that money, she would transfer her interest in the properties at Suburb D and Suburb G to him, and provide him with an indemnity in relation to future tax issues. Had the wife accepted this manner, not necessarily the quantum, as the way of continuing with the litigation, this would have resulted in the husband and his father then determining their entitlement to the net equity in the properties in accordance with their partnership agreement, which was an equal entitlement.
This approach, if adopted, would have resulted in the dispute only concerning the interest as between himself and his wife of the husband’s 50% share of the equity in the properties and ensured that Mr E Tritton was not involved in the proceedings avoiding the necessity for Mr E Tritton to join the proceedings.
Additionally, acceptance of this manner of continuing the dispute, namely as between the husband and wife only and not involving a third party, may have permitted the husband and his father to continue their partnership, which they had commenced prior to the husband and wife meeting. One of the significant casualties of this litigation has been that the husband and his father have not been able to continue their prior successful joint venture partnership enterprise.
This manner of continuing the dispute was not accepted by the wife.
The wife maintained that at law she owned the properties and that she and her husband beneficially owned the properties. The ownership of the equity in the properties by the husband and wife as asserted and maintained by the wife was the real point of contention necessitating Mr E Tritton to join the proceedings between his son and his former wife to protect his significant beneficial interest in these properties. The reality is the wife did not change her position throughout the proceedings and maintained this erroneous and factually inaccurate position up to the conclusion of the hearing and may still maintain this position.
I found the wife's application in respect of her former father-in-law was not only wholly unsuccessful, but that it was based on erroneous facts and was without merit. It should have been clear to her from at least the time the second respondent filed his points of claim that her application was doomed to failure. The wife was represented for the majority of the hearing and only became unrepresented in late 2019 and thus had ample opportunity for legal advice on this issue. It should have been clear to the wife her position was doomed to failure for at least the following reasons.
On her own evidence in her Affidavit, and orally at the trial, she admitted that:
a)Her husband and his father as tradesmen were in a partnership and had been prior to her and the husband meeting. The wife would not admit in oral evidence that they conducted a joint venture yet this is how she described their activities in her Affidavit.
b)Part of the funding for the properties at Suburb D and Suburb G came from the joint partnership profits of her husband and his father from their various joint ventures which monies had been deposited into a Westpac bank account styled JV account to which she had made no contribution directly.
c)She put no funds of her own into the acquisition of the Suburb D property which was purchased in her name prior to she and the husband’s marriage and when she was still living in Melbourne.
d)She put no funds of her own into the acquisition of the Suburb G property, whilst at that time working as a finance professional.
e)For a substantial period of the parties’ marriage, she carried out the books of account for her husband and father-in-law’s partnership and knew how they operated their partnership and carried out their joint ventures and was involved in financing for the purchase of the Suburb D and Suburb G properties.
The wife is a skilled finance professional and is well versed in accounts and books of accounts, having managed the husband and father-in-law’s accounts for many years during the marriage. Upon a careful reading by the wife of Mr E Tritton’s points of claim, which I set out in the judgment, it would have been clear to her that her position was doomed to failure and that the position her husband and former father-in-law maintained was the clear and only outcome in this matter.
The percentage division to which the wife was entitled of her and her husband’s 50% ownership of those properties is certainly a matter that if it could not be agreed required judicial determination. However, the wife chose not to follow that sensible course at any time and maintained her erroneous position that she and her husband owned the entirety of these properties solely, and this was the only reason the second respondent joined the proceedings.
Not only did the wife not accept this clear and obvious evidence she intimately knew the following facts:
(1)How Suburb D and Suburb G were funded and the ongoing liability for payment of the mortgage which was her husband and father-in-law’s partnership;
(2)She prepared and carried out the books of account during her marriage to the husband, and they were married for some 10 years; and
(3)She is a highly skilled, qualified finance professional earning, as best I can ascertain, $160,000 per annum for three and half to four days per work week.
Her skill set alone, and her intimate knowledge of the business partnership and practices of the husband and his father, should have led her to the conclusion that the case her husband and his father ran was the only way to look at this evidence.
The wife knew how her husband and his father made their money. They bought a property, renovated or demolished and/or rebuilt, sold the property and used the profits to buy the next property. That is how this company and their partnership worked, and it was very successful until such time as the wife and husband separated.
The wife denied she was a company secretary for L Pty Ltd, and yet an ASIC search showed she was.
Funds to purchase the Suburb D and Suburb G properties were held in the JV Westpac account, which was an account operated pursuant to the partnership between the husband and his father, and the wife knew full well this was where money to part-fund these two projects in particular were held. The wife knew full well that the Suburb G property in particular was funded by a combination of borrowings and all monies retained from the various profits of the multitude of joint ventures the husband and his father had carried out.
As I stated at paragraph 179 of my judgment of 20 September 2019:
The wife failed to take account of her former father-in-law's entitlement as an equal partner to 50 per cent of the partnership profits.
At Paragraph 180:
The way in which the husband and his father carried out the partnership is in stark contradiction to the wife's case, and the wife has merely recreated history to achieve her ends, which is that she and her husband own the properties at [Suburb G] and [Suburb D] together.
At Paragraph 181:
I find the third party, [Mr E Tritton], and the husband have made out their case that he and his father own 50 per cent of the value of the properties in [Suburb D] and [Suburb G], and that the properties to be included in the matrimonial pool for division is 50 per cent of the value of those properties less the mortgages.
I found there was clear agreement on the joint venture in relation to purchasing the Suburb D property, which was that it would be purchased in the wife's name in order to secure finance because, at that time, the father and the husband were heavily geared with the N Street project which had yet to sell.
Similarly, I found at paragraph 191 of my judgment, there was clear agreement on the joint venture to purchase Suburb G which was purchased in the wife's sole name as a tax-effective arrangement based on advice from the father's accountant. The wife agreed with this in her oral evidence. The wife made no direct financial contribution to the purchases of Suburb D or Suburb G.
The wife did not recite the facts correctly in her Affidavit material and attempted to mislead the Court. For example, the wife said in her trial Affidavit, referred to at paragraph 193 of my judgment:
I'm the registered owner of [H Street, Suburb D\. I purchased this unit in June 2006, took out a loan with Westpac in my sole name, and my parents provided a guarantee. The remaining $400,000 was underpinned by my salary. [Mr Tritton] made the deposit for the unit from his savings in the first instance. Once my loan was cleared, [Mr Tritton] was repaid this value, and the property was fully geared up with debt.
The wife made no mention of her husband and father-in-law’s involvement in this purchase. In cross-examination, she admitted finally that she would not have been able to purchase this property alone or make the mortgage payments on the loan taken out.
After the purchase of the property at Suburb D, the mortgage was paid out by the husband and his father-in-law in order to provide security for the purchase of Suburb G. The wife was involved at every step in this particular transaction given Suburb G was purchased in her name, yet made no mention of this factual reality in this paragraph of her Affidavit.
The wife admitted under cross-examination that she knew the following in relation to the purchase of Suburb G.
Firstly, the Suburb D mortgage drawn-down of $520,000 made possible by a deposit of $475,000 into the mortgage from the profits of the husband and his father’s joint venture of UU Street.
Secondly, a $130,000 loan from GG Bank secured over the home of the second respondent and his wife.
Thirdly, the balance was paid from profits and distributions of the husband and his father’s partnership and joint venture.
Finally, the purchase price was $2,300,000. The balance required to settle the purchase after the drawdown of the Suburb D mortgage and the GG Bank loan was $1,630,000. In cross-examination the wife agreed these funds came from the partnership profits of the husband and her father-in-law in the JV account. The wife always knew this having been intimately involved in the purchase of Suburb G property and thus it is not surprising that it was clearly admitted by the wife in cross-examination.
The wife’s answer to this clear evidence was that her father-in-law had drawn down or drawn more out of the business than her husband over the 10 years, that she and the husband had only taken minimal drawings from the business and in exchange for or in repayment for these minimal drawings she and the husband would receive the profits of or equity in Suburb D and Suburb G.
The wife asserted there was a document prepared by an accountant to support this inequality in drawings, yet was unable to provide that document from an accountant. The wife provided a spreadsheet prepared by herself to support her argument and this document was not admitted into evidence.
The wife alleged the accountant who prepared the document she asserted had been created on this issue had failed to answer a subpoena she had issued to him to produce this document. That was a falsehood. He had answered the subpoena by telling her no such document had been prepared by him, and to pursue the matter, if she wished to, with another company which the wife did not follow through with.
The wife continued to allege that, in some way, her father-in-law had defrauded her and the husband’s the partnership and alleged that her father-in-law and mother‑in‑law had used company funds to renovate their home with no evidence to support this argument or provide any document to support her argument. The above arguments were false and her attempt to besmirch her father-in-law and his wife has rebounded sorely in my being able to accept her as a witness of truth. This alleged fraudulent use of partnership funds was one of the reasons she advanced for the adjournment application before Deputy Chief Justice McClelland and thus she asserted that she had an interest in the second respondent’s property a false claim that came to nothing and was not maintained at the final hearing.
Fourthly, the wife did not produce at any time, despite repeated requests, a copy of her current contract of employment, or any contract of employment and as noted in my judgment, I still have no idea what her contract employment conditions are and nor does the husband.
From a reading of paragraph 200 of my judgment, the wife minimised the income she was earning in 2018/19 by requesting from her then employer that he reduce payment to her from invoices rendered by her to him from $11,000 to $5,500 monthly. Her words, in an email to her employer at that time, 7 March 2019, were as follows:
Hi [Mr PP], Thank you for the opportunity to now finalise my salary package. I've provided the comparative rosters package, and what I've been earning for the '17/'18 financial year. My proposal is, for the '18/'19 financial year, noting I've only been invoicing 5K per month to avoid showing my real income to the Malaka.
"Malaka" means "shit" in Greek, which I found was a reference to the husband.
The wife had been invoicing this gentlemen, up to June 2018, $11,000 per month and from July 2018, her invoicing had reduced to $5,500 per month, and the wife gave no explanation for this reduction. The wife alleged the email had been doctored which evidence was rejected by me. The wife mislead the Court on this occasion as to her income and to this date, the Court is not satisfied as to her income. The wife only tendered her Financial Statement at the commencement of the hearing, and no one in these proceedings knew what she swore her income was until that time. It is not surprising I found the wife was not a witness of truth.
These are the facts and the relevant conduct and actions of the wife which have weighed on my mind in this costs application.
The second respondent’s submissions in support of his costs are as follows.
At the Conciliation Conference on 28 September 2018, the second respondent's proposal for settlement was as follows. That it be declared that the wife holds and has held the properties at Suburb G and Suburb D on trust for Mr Tritton and Mr E Tritton; that she do all acts and things, and sign all documents necessary to transfer the property to the husband and he, as tenants in common, as to an equal share; that within 42 days of the transfer, the husband and his father would discharge the mortgage on the Suburb D property at $520,000 and she would be debt free leaving the dispute between she and her husband only.
This offer is almost precisely the order I made having found that the wife held those properties on trust, in three categories such was the strength of the husband and his father’s case.
I found at paragraph 210 of my judgment, there was an express trust granted by the oral agreement.
At paragraph 213 of my judgment, I found that there was a common intention for a constructive trust over the properties in favour of the husband and father. That the three parties had formed a common intention as to ownership of the beneficial interest, that the husband and his father had acted to their detriment in relation to their interest as they put the entirety of their profits from their venture for the period of 2006 to 2014 into the Suburb D and Suburb G properties, yet the property was held in the wife's name.
At paragraph 214, that the wife held the property on a resulting trust in favour of her former father-in-law and husband.
Thus, at every level, the second respondent has been successful. Both as to his Initial Response and the Orders he sought the Court to make and the Orders that were made by the Court.
When one reads the second respondent’s initial Response, filed 16 January 2017 together with the initial Initiating Application filed by the husband on 28 September 2016 seeking that the wife transfer to him and his father the two properties as tenants in common, that he pay her the sum of $835,000, and that she indemnify her husband and his father in relation to future tax liabilities, Capital Gains Tax, and the like, the wife would have done well to have accepted that position if only as to how to proceed with the matter as a dispute between she and her husband only.
I reject the submission made by Mr Othen that because the husband's Initiating Application did not refer to the interest of her father-in-law in these properties. I could not use that application as a date from when to calculate costs.
I rejected that submission for I am entitled and should read the entirety of the documents filed by the husband at that time, namely his Affidavit and Financial Statement, because each document informs the other and together contain his case at that time. His Affidavit clearly referred to Suburb G and, obliquely, to Suburb D. I had his Financial Statement which set out what he said the assets and liabilities were, and I had his application. There was no need to refer precisely to his father’s interest in the properties at that time as he sought an Order that the wife transfer the properties to he and his father as tenants-in-common thereby indicating what his father’s interest in the properties were.
Had the wife accepted that offer at that time, or even the offer made by Mr E Tritton on 28 September 2017, Mr E Tritton would have been out of the picture and there would be no indemnity costs application made by him against the wife.
The wife's conduct in these proceedings, in relation to the second respondent, falls within an extreme category, as I see it for the following reasons.
The first is she has, imprudently, refused to accept an offer which was ultimately the Order made by this Court. Her imprudence is made out by her own evidence in her Affidavit that her husband and his father carried out joint ventures and that a significant sum of money, in excess of $1,600,000 to finalise the payment for Suburb G was paid from the JV Westpac account of her husband and his father’s joint venture partnership business.
Secondly, she has made allegations of fraud against Mr E Tritton, stating that he used funds from his and his son's partnership business to renovate his own home, and drew greater drawings from the partnership profits than she and her husband, and was unable to prove any such allegations at any level.
Thirdly, the wife failed to comply with requests in relation to producing her contract of employment; did not file a Financial Statement, in accordance with the trial directions, until just at the commencement of the trial; sought to mislead the Court in relation to her allegation of non-answering of a subpoena by a third‑party accountant, which was simply not correct; was represented by lawyers through the majority of these proceedings and ought to have known upon the having been given proper advice that her application could not possibly be successful particularly after having read the points of claim of Mr E Tritton.
Fourthly, the wife prolonged the proceedings unnecessarily by her stubborn refusal to make full and frank disclosure of her true financial position.
Fifthly, the wife brought a strikeout application against the second respondent, sought voluminous and unnecessary particulars, and at the hearing date of the strikeout application withdrew her application.
Sixthly, the second respondent was forced to join the proceedings because the wife would not accept what she clearly knew to be the factual reality of the situation that although at law she owned the two properties, the reality was that her husband and his father had an equal equitable interest in the net value of the properties as the profits from their joint ventures and partnership over 10 years of the parties relationship, and prior to their relationship, which had been used to fund the purchase of Suburb G and reduce the mortgage on Suburb D to nil prior to that purchase. The second respondent needed to act to protect his interest in these two parcels of real estate given the position the wife maintained throughout the proceedings including during the hearing.
Seventhly, the evidence was clear this was a family business, a family partnership, and a family venture. The wife resiled from that position at separation as the properties were in her name, breached the trust the husband and father-in-law had placed in her initially and during the relationship and took advantage of her legal title over these two properties.
The wife took advantage as she saw it and the consequences have flowed. I find the wife did know and cannot escape a finding that she should have known, consistent with Sheppard J’s decision in Colgate-Palmolive,[24] that the action she commenced and continued had no chance of success.
[24] Above note, 11.
Thus, I find as submitted to me by Mr Wahhab on behalf of the second respondent, that the wife maintained her action “for some ulterior motive, or with wilful disregard of the facts”.[25] I accept the further submission of Mr Wahhab it was to increase the matrimonial pool for division between she and her husband and/or get a better deal by holding her husband and his father to ransom, particularly when she had been successful in vacating the expedited hearing in September 2018.
[25] Above note, 11.
The wife engaged two firms of lawyers to act on her behalf in the family law proceedings simultaneously. VV Lawyers appeared for her initially, and then in addition, she engaged a firm by the name of WW Lawyers. The husband and second respondent were faced with dealing with two sets of lawyers, a remarkable circumstance, and she had both VV Lawyers and WW Lawyers appearing for her at the Conciliation Conference.
A voluminous request for particulars was drafted by WW Lawyers and was objected to successfully, yet VV Lawyers sent the same request out on their letterhead at a later point in time.
The wife filed an application to strike out the second respondent's points of claim. This was a baseless and groundless application, given I have accepted entirely the second respondent’s points of claim.
The wife withdrew this application to strike out at the hearing of the application. This conduct, having two sets of solicitors acting on your behalf at the one time, filing an application to strike out and then withdrawing it at the very date of that hearing, is what I regard as an abuse of the process of the Court and is again egregious conduct by the wife causing the second respondent and the husband unnecessary legal costs.
The adjournment applications in this matter caused by the wife are profound.
This matter was due to be heard before Deputy Chief Justice McClelland in November 2018. His Honour adjourned the proceedings upon the application of the wife who was not ready for a trial that had been expedited.
On 30 October 2018, the wife filed an Application in a Case seeking that the hearing be adjourned which application was heard on 2 November 2018 with judgment being delivered 6 November 2018, and the hearing dates were vacated.
There had been multiple mentions before Deputy Chief Justice McClelland prior to this time, wherein the wife sought extensions of time to file her material, and still she was not ready in November 2018, despite the matter having been listed for and expedited trial in November as far back as 21 May 2018.
The wife was ordered to pay her share of the single expert's fees by 30 January 2019, and file and serve her Affidavits upon which she intended to rely by 1 March 2019, and she failed to comply with these Orders thus reports were not made available to the court and parties.
One of the wife’s arguments for the adjournment before Deputy Chief Justice McClelland was that she had no money, and could not pay her share of the expert's fee and therefore could not get the matter ready for trial. This was at a time where I have found she had, by subterfuge, reduced her income from $11,000 per month which she had been enjoying up to June 2018, to $5,500 per month without explanation.
The wife made a claim of an interest in her former father-in-law and his wife's home at Suburb HH alleging they had used joint funds of the business to renovate their home. This was a spurious and groundless claim which she also relied upon in her adjournment application seeking further time to investigate, yet nothing came of this at the trial.
For all of the above, the wife’s conduct falls into the category of “exceptional.” The facts of this matter are “exceptional,” and she has "made allegations which ought never to have been made, and unduly prolonged the case by groundless contentions". The wife made many allegations at the final trial which ought never to have been made, and unduly prolonged the trial and the matter generally. The wife simply took advantage of a situation, and the trust these men had placed in her.
The costs thrown away on the adjournment were reserved. I see the wife's conduct on that occasion as falling within a special category or circumstance in relation to both the husband and the second respondent that would warrant the making of an indemnity cost Order. The wife’s groundless allegations, coupled with her attempts to minimise her income and plead impecuniosity to the Court, place her conduct at the extreme level of poor and egregious conduct warranting an indemnity costs Order, and I will so Order for the husband and his father in relation to the costs thrown away by the successful adjournment application.
The wife's attempt to mislead the Court by tendering documents she had created to support her proposition was further evidence of the conduct and lengths she would go to to pursue what she asserted in her material was fact. The wife used the words "skimmed money from the partnership accounts," and "took more drawings than her husband," as against her father-in-law and mother-in-law, and these allegations were baseless and without foundation.
The second respondent has made out his application for costs on an indemnity basis. His capital has been tied up for three years and he has been unable to use the capital he had in these properties to continue to operate his company. He has suffered significant economic loss due to the wife's conduct. I find he is entitled to indemnity costs for the proceedings from 27 September 2017 the date of the offer he made prior to the Conciliation Conference which was held on 28 September 2017 and I will so order.
To reiterate the principles in an indemnity costs application from Worth & Worth and ICL (No.2)[26] where their Honours quoted his Honour Judge Holden’s decision in Mundy v Bowman:[27]
a)Where it appears that an action has been commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success, in such cases, the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts;
b)Making allegations of fraud knowing them to be false in the making of irrelevant allegations of fraud;
c)Evidence of particular misconduct causing loss of time to the court and to other parties;
d)The making of allegations which ought never to have been made, or the undue prolongation of a case by groundless contentions; and
e)An imprudent offer to compromise.
[26] Above, note 7.
[27] Above, note 18.
All of these categories apply to the wife’s vis-à-vis her former father in law.
Going now to the husband's application for costs.
The husband set out in his Affidavit the tortured procedural history in the matter.
The wife failed to comply with the directions for trial for an expedited hearing and sought an adjournment of the expedited trial for reasons now known to be spurious. I find the husband is also entitled to indemnity costs for his costs of that adjournment application. Those costs are $6,100.
The wife failed to comply with Orders concerning the valuation of the Suburb HH property, failed to pay for half the costs of the preparation of the expert's report, and failed to comply with her obligation of full and frank disclosure.
The wife’s offer to settle made on 26 September 2019 was to retain the Suburb G property which had a value of $2,800,000 and was unencumbered, and that she transfer the Suburb D property to the husband. Given the size of the mortgage on the Suburb D property, this was almost 100% of the liquid assets to her. The wife has been wholly unsuccessful in relation to obtaining that which she sought in her offer.
The husband initial application filed on 27 September 2016, consistent with his father's offer of settlement later in time, was that the wife transfer the properties to he and his father as tenants in common, and he pay her a sum of $715,000 and indemnify he and his father in relation to capital gains tax, and the like.
On a strict reading of the husband's offer the monies I have ordered he pay his wife is $152,000 less than he offered to pay her when the proceedings commenced. However, his offer also sought she indemnify he and his father in relation to potential tax issues into the future.
My verdict did not order the wife indemnify the husband or his father. The relevance of the husband’s offer of September 2016 is the manner by which the proceedings should have continued namely a dispute between he and his wife only as to their 50% ownership in the relevant properties and the percentage split of that equity to each of them.
In November 2018, the husband offered to pay the wife $1,250,000 less any unpaid land tax, that the wife indemnify him as to one-third of any subsequent assessed tax penalties, income tax, Capital Gains Tax or interest referrable to the financial years 30 June 2008 to 30 June 2016 when she had prepared the books of account for the business. This sum had been calculated at about $60,000. The Capital Gains Tax to be paid on the sale of both properties was $125,000, a total of $185,000. This sum, together with other assessed taxes, amounted to sum $257,103. The result to the wife of this offer in November 2018 was $1,250,000 less $257,000, netting her some $1,000,000 and being $420,000 in excess of that which I ordered she receive and again would have resulted in her father-in-law no longer being a party to these proceedings.
On 7 May 2019, a further offer was made by the husband that he pay her $850,000 together with and indemnity from her for tax. Had the wife accepted this offer, she would have netted some $69,895 more than I ordered she be paid and her father-in-law would no longer be in the proceedings.
Thus, as can be seen, the wife has been wholly unsuccessful in relation to the offers made by the husband in November 2018 and May 2019 and partially unsuccessful in relation to the Initiating Application filed by the husband on 27 September 2016.
As between the husband and wife, I do not see her conduct is as egregious at that in relation to the second respondent. Although her conduct has fallen into the following categories of behaviour perhaps warranting an indemnity costs order from a reading of his Honour Judge Holden’s decision in Mundy v Bowman:[28] being:
a)Where it appears that an action has been commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success, in such cases, the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts;
b)Making allegations of fraud knowing them to be false in the making of irrelevant allegations of fraud;
c)Evidence of particular misconduct causing loss of time to the court and to other parties;
d)The making of allegations which ought never to have been made, or the undue prolongation of a case by groundless contentions; and
e)An imprudent offer to compromise; there is a difference.
[28] Above, note 18.
I accept the wife needed time to assess what she regarded as the appropriate division to her of the asset base of she and her husband and needed time to be properly advised. Where she has caused significant costs to be incurred is her refusal to accept the clear and obvious fact that she and her husband only owned half of the equity in the Suburb G and Suburb D properties. Although there was clearly a justiciable issue as to the division between her and her husband of their entitlement to that equity, there was no justiciable issue in relation to the entitlement as between her father-in-law and her husband of the net equity in those properties. The wife knew the reality of the situation all too well and chose to ignore the second respondent’s clear claim for wilful purposes.
On these facts I do not accept that the husband is entitled to an indemnity costs Order for the whole of the proceedings in relation to property, other than the adjournment application which I have dealt with separately.
In relation to the property proceedings as a whole, I have formed the view that the appropriate assessment of the husband’s cost is 50% of his costs, post the 18 November 2018 offer to settle, which is an assessment of costs by the Court, a position urged upon me by the applicant husband.
This is an appropriate course to adopt to end these proceedings. A taxation would only prolong what has been very difficult litigation for the husband and his father with far-reaching consequences for their hitherto successful partnership and business and what will be very difficult consequences for the wife to accept.
Had the wife accepted the husband’s offer of 18 November 2018 no costs from that date for any party would have been incurred. The wife must now deal with the consequences of her imprudent refusal to accept an offer which would have placed her in a position of receiving some $420,000 more than the award I determined she was entitled to.
It was imprudent of her in the extreme to reject this offer and the husband has incurred unnecessary costs due to her decisions and conduct as follows.
The wife failed to comply with her obligation of full and frank disclosure. My findings, at paragraphs 31 and 198 of my judgment, of the wife's deliberate course of conduct to mislead and hide from the Court and her husband, her income, is a significant factor in my determination in relation to this costs application. I found the wife was not a witness of truth when it came to financial matters, at paragraph 60.
The reality is that the husband has been wholly successful in his application that he and his father owned equally the equity in the properties at Suburb C and Suburb D, and also successful in the quantum and in the sharing of that equity as between he and his wife. In those circumstances, the costs incurred by the husband from the date of the 18 November 2018 offer, are costs he should recover at 50% of the costs actually incurred and I will so Order. This does not include costs for the adjournment application.
COSTS ORDERS TO BE MADE
The second respondent’s costs from the Conciliation Conference in 2017 to the date of the trial on an indemnity basis are $148,743.46 and include the costs for the strikeout application and adjournment application.
The husband’s costs on an indemnity basis for adjournment application are $6,100.
The husband’s costs from 18 November 2018 as billed by his lawyers are $133,611 less the adjournment application costs of $6,100 a net figure of $127,511.
50% of $127,511 is $63,755. This figure together with the adjournment application costs are costs to the husband of $69,855.
The husband’s cost of $69,855 together with the second respondent’s costs of $148,783.46 total $218,598.46.
I order that the husband deduct from monies to be paid to the wife the sum of $218,598.46, being the total of costs to be paid by the wife to the husband and second respondent.
The husband is to pay to the second respondent’s his costs forthwith or as he may direct.
In relation to the second respondent and husband’s application for costs of this costs application, I have determined I will not exercise my discretion to make a costs order for the following reasons.
The consequences of the cost application for the wife as initially sought by the husband and the second respondent were financially very serious for her. It was both reasonable and to be expected that she would defend the costs application and Orders sought that she pay almost the entirety of the verdict she received to her former husband and his father by way of costs.
The wife has been successful in a defence to the initial indemnity costs sought by the second respondent, even though I have made an indemnity costs order from a date later in time than that agitated by him. The wife was only unsuccessful in relation to an indemnity costs order sought by the husband in respect of the adjournment application otherwise I have assessed his costs.
In those circumstances, it cannot be said that the wife has been wholly unsuccessful and I will not exercise my discretion to make a further cost Order.
Unlike in the primary proceedings, the wife has not delayed, obfuscated or mislead and has conducted her defence appropriately. These factors, together with the quantum of costs I have ordered her to pay to her former husband and father in law, have militated against exercising my discretion to consider making a further cost Order.
The husband has also sought his costs for the slip rule application in the sum of $6,007.84. I will not allow those costs as these costs were incurred through no conduct, delay or action of the wife, and was rather a regrettable error of the Court. In these circumstances, the parties will bear their costs of that application.
I certify that the preceding one hundred and fifty-three (153) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Henderson delivered on 25 May 2020.
Associate:
Date: 25 May 2020
8
2