Tsay and Lou (No 2)

[2019] FamCA 389

FAMILY COURT OF AUSTRALIA

TSAY & LOU (NO. 2) [2019] FamCA 389

FAMILY LAW – COSTS – Between parties – Indemnity costs.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.18

Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536
Kohan & Kohan (1992) 16 Fam LR 245
Penfold v Penfold (1980) 144 CLR 311
Prantage & Prantage (2013) FamCAFC 105
Stephens & Stephens [2010] FamCA 184

APPLICANT: Ms Tsay

RESPONDENT: Mr Lou

FILE NUMBER: SYC 1304 of 2018

DATE DELIVERED: 20 June 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Henderson J

HEARING DATE: 19 March 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Shuttleworth

SOLICITOR FOR THE APPLICANT: McLachlan Thorpe Partners

COUNSEL FOR THE RESPONDENT: Mr Green

SOLICITOR FOR THE RESPONDENT: Pancific Legal

Orders

1. The husband is to pay, by way of costs, the sum of $22,547.00 to the wife, or as she may otherwise direct, within 30 days of today’s date.

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 Tsay & Lou (No.2) 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 1304 of 2018

Ms Tsay

Applicant

And

Mr Lou

Respondent

REASONS FOR JUDGMENT

1. The matter of Tsay is a costs application by the wife consequent upon an application filed by the wife and heard on 19 March 2019 that the husband comply with court orders.

2. The wife seeks her cost be paid on an indemnity basis or in the alternative on a party/party basis. The matter before the court on 19 May 2019 was ultimately resolved by consent, however, the wife claims that she was required to bring the matter to court to have the matter resolved as the husband had previously failed to comply with court orders. This is not the first time the husband has failed to comply with orders of the court.

3. A brief history of the matter is important as the husband’s conduct is at the very gravamen of the issue before me.

4. The material I have read was:

   a)Both parties’ submissions as to costs and the annexures thereto;

   b)The decision of Justice Rees of the Family Court on 15 January 2019; and

   c)Orders of Judge Boyle of 9 July 2018

5. The Orders of Judge Boyle of the Federal Circuit Court dated 9 July 2018 provided for the disposition of the net proceeds of sale of the property at Suburb K, a spouse maintenance order and other consequential orders following the sale of that property.

6. Order 8 required that the husband was to direct the principal or the agent of T Street, Suburb B to pay to the husband’s solicitors the balance of the deposit after the deduction of commission in respect of the sale of T Street, Suburb B and the remainder to be held by his solicitors in a controlled monies account.

7. Her Honour also made orders that the husband was to pay the wife’s spouse maintenance arrears and ordered lump sum spousal maintenance be paid in the amount of $1,400 per week and transferred the proceedings to the Family Court.

8. On 8 October 2018 the husband changed solicitors who had represented him in the proceedings before Judge Boyle in July 2018 to Mr M. The Orders made by Judge Boyle were amended on 30 July 2018 and 8 October 2018.

9. Relevantly, those amendments are as follows.

10. Justice Loughnan heard the matter on 30 July 2018 and ordered that the balance of monies referred to in Order 8 of Judge Boyle’s Order be paid to the applicant’s solicitor and the husband was ordered to direct a real estate agent to comply with that order.

11. In addition the husband was directed to pay to the wife the sum of $1479.32, comply with Order 5 of Judge Boyle’s Orders of 9 July 2018 and of monies held in the controlled monies account, $18,000, would be paid to the wife forthwith and weekly payment of $1,400 commencing 6 August 2018 be paid as ongoing spousal maintenance.

12. On that occasion the Court noted that the husband disputed he owned the funds from which the wife was being paid spouse maintenance, that the funds belonged to H investment unit trust, that the husband had filed an appeal against the order of $1,400 per week spousal maintenance and his application for a stay of the spousal maintenance order pending his appeal was dismissed.

13. On 8 October 2018 the matter came before her Honour Justice Rees. Her Honour appointed the wife trustee for sale of the property at L Street, Suburb D being a variation of Order 3 made by Judge Boyle on 9 July 2018, proscribed how the proceeds of sale were to be paid including the wife’s costs of the application before her Honour in the sum of $5,000 being paid and that the remaining proceeds of sale be paid to the husband’s solicitors P Lawyers and to be held in a controlled monies account.

14. Her Honour ordered that the wife carry out work recommended by the estate agent to get the property into the best condition possible for sale, if the husband’s prior lawyers N Lawyers still held money in trust on his account this was to be paid to his current solicitors P Lawyers to be held on the same terms and conditions as prescribed in the Orders of 9 July 2018 made by Judge Boyle. Those terms and conditions were that the money was to be held in a controlled monies account. The husband was ordered to vacate the Suburb D property within four weeks of the date of her Honours orders.

15. The balance of the monies after disbursements were paid pursuant to the 9 July 2018, 30 July 2018 and 8 October 2018 orders totalled $40,580.68.

16. The wife discovered from an email received by her lawyers Monday 25 February 2019 that the monies had not been held by P Lawyers in accordance with the 9 July Orders. The monies had been dealt with as follows, $10,785 had been utilised in payment of the husband’s legal fees and disbursements, $28,000 had been released to the husband leaving a sum of $1,795.68 in the P Lawyers trust account.

17. By letter dated 26 February 2019 P Lawyers advised they had been instructed to release this money despite it being clear from the orders made by the court the money was to be held in a controlled monies account.

18. Consequent upon this breach by the husband aided by his lawyers, P Lawyers, to disburse money contrary to the orders of Judge Boyle the wife was required to commence litigation again to ensure that upon the sale of Suburb D her firm would hold the net proceeds of sale. Order 3.6 of Justice Rees’ Orders of 8 October 2018 specified with clarity that the balance of the sale proceeds of the property at L Street, Suburb D was to be held by the husband’s solicitor in a controlled monies account pending further order or the written direction of both parties.

19. The wife was also concerned, having regard to the husband’s prior conduct that $100,000 payable by the purchaser pursuant to special condition 17 from the sale of the Suburb K property may be disbursed by the husband and his lawyers contrary to Order 9 of Judge Boyle’s Orders when paid. It is clear the application brought by the wife and heard on 19 March 2019 was necessitated by the failure of the husband to comply with prior court orders and her cogent and reasonable concerns that he would fail to do so in the future.

20. The Orders of 9 July 2018 required the husband to cause the Suburb D property be sold within three months of the orders. The husband failed to comply with this order. On 8 October 2018 the wife was appointed trustee for the sale of Suburb D property and the husband was ordered to vacate the property within four weeks of the making of the orders. The husband failed to comply with this order.

21. The matter came before the court on 15 March 2019 on the wife’s application for a warrant of possession of the Suburb D property which was granted. The wife was advised the husband had vacated the property on 14 February 2019 some three months after the date he was required so to do by the orders of Justice Rees.

22. Again, it is clear that the wife was required to return the matter to court in order to have the husband vacate the property and for her to carry out necessary renovation work which necessitated additional legal fees, delay and costs that ought not to have been borne or incurred by her had the husband complied with Justice Rees’ orders.

23. One of the significant consequences of the husband’s failure to vacate the property was that by the time she was in a position to effect renovations and repairs she had run out of funds so to do. This necessitated the wife filing a further Application in a Case for additional funds to carry out the necessary renovations and repairs. This application was necessitated solely by the husband’s failure to comply with orders of the court.

24. The husband abandoned his appeal against the spousal maintenance orders, was ordered on 5 December 2018 by Justice Ryan to pay the wife’s costs in the amount of $2,729 within one month. He failed to comply with that order as well.

25. Ordered 10 of the Orders made by Judge Boyle on 9 July 2018 prohibited the husband from encumbering, pledging, charging or creating any lien over the Suburb D property without the consent of the wife or order of the court. N Lawyers who had represented the husband at this time lodged a caveat over the Suburb D property claiming a lien the sum of $64,342.39 for unpaid legal fees. The husband made no disclosure to the wife that this had occurred. This is an additional factor indicating the necessity for the wife in bringing the matter back to court in February 2019.

26. On 10 October 2018 a caveat was lodged by Mr G over the Suburb D property claiming the mortgage by virtue of the loan agreement dated 6 February 2018. The husband made no disclosure to the wife of this caveat and had sworn in his Affidavit of 29 June 2018 at paragraph 28 (b) that he had repaid a loan of $550,000 to Mr G.

27. To date the husband has failed to provide the wife with a copy of any loan agreement dated 6 February 2018 as referred to in the caveat lodged by Mr G despite orders he was to do so having been made on 9 March 2019. This failure to comply by the husband was a further part of the wife’s interim application filed 28 February 2019.

28. On the first return date of the wife’s interim application filed 28 February 2019, namely 6 March 2019 the matter was transferred to Justice Loughnan. The husband left the court and the building before the matter was dealt with by his Honour on 6 March 2019 and his honour listed the matter for potential undefended hearing on 14 March 2019. The wife incurred legal fees on the first return date of her application as the matter could not progress due to the husband departing the court precinct. The legal costs incurred by the wife on that occasion were thrown away due to the husband’s conduct.

29. On the return date of 14 March 2019 the husband had failed to file Response or Affidavit to the wife’s Application in a Case and attended without representation before Justice Harper. He sought an adjournment of the proceedings and to have the assistance of an interpreter. However, the husband had appeared in person on 7 December 2018 and appeared on his own behalf without the assistance of an interpreter before Justice Johnston. The matter was further adjourned to 19 March and an interpreter in order to assist the husband with directions made for the filing of material in response by him. The wife incurred legal fees on that occasion due solely to the husband’s conduct.

30. The matter came before me on 19 March 2019 the husband had not filed an Affidavit in accordance with Justice Harper’s Orders, not produced documents in accordance with the notice to produce served upon him by the wife in accordance with Justice Harper’s orders and was represented by Brendan Green of Counsel. On that occasion the majority of the orders sought by the wife were agreed to on 19 March 2019.

31. I have read the respondent’s written submissions to the wife’s cost application and it assists me not one iota. His submission is based upon the husband’s version of events, discussions between parties in relation to funding cost of the proposed work at Suburb D, that the husband in incurred cost in vacating the Suburb D property, was impecunious at the time and that the wife was aware of this, that the husband left the court early before Justice Loughnan as he was to take the child C to a sports lesson, that he returned after the orders were made and tried to obtain legal representation and an interpreter, that the husband breached no order when his former solicitors and Mr G lodged caveats on the title to the Suburb D property and that he was not able to proceed on 6 March 2019. That he was required to obtain new layers when he wife joined his previous solicitors to the proceedings. None of this is an answer to the husband’s persistent failure to comply with Court orders.

32. The husband failed to vacate the Suburb D property within four weeks of Justice Rees’ Orders of 8 October 2018 requiring the wife to bring a warrant for his ejectment from the property. The husband failed to advise the wife of the lodgement of two caveats on the title of the property in relation to legal fees asserted to be owned by him and a loan to Mr G.

33. Not one submission made by the husband in his written submissions assists me to understand his consistent and clear breaches of court orders throughout this period as detailed in the evidence filed by the wife to Application in the Case of filed 22 February 2019 and subsequent amended Applications in a Case filed and to the finality of those various applications on 19 March 2019.

34. It is correct that in the Family Court each party bears their own costs but the court retains a discretion to vary that order under section 117(2)[1]. It is a correct statement at law that indemnity costs are only ordered in exceptional circumstances.

    [1]Family Law Act 1975 (Cth), s 117(2).

35. The first task is to determine whether or not to exercise the discretion under section 117(2)[2] to order costs given the usual order in this court is each party bears their own costs. Relevant matters under section 117(2)[3] are as follows:

    [2] Above, note 1.

    [3] Above, note 1.

    a)Subject to subsection (2)[4] each party to the proceedings shall bear his or her own costs;

    b)If in proceedings under this Act[5] the court is of the opinion that there are circumstances that justified in doing so court may subject to subsections (2A), (4), (4A), and (5)[6] 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;

    c)(2A)[7] in considering what order if any should be made the court to have regard to a the financial circumstances of each of the parties to the proceedings;

    d)The financial circumstances of each of the parties to the proceedings;

    e)Whether the parties are in receipt of legal aid;

    f)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;

    g)Whether the proceedings were necessitated by the failure of a party to comply with previous orders;

    h)Whether any party has been wholly unsuccessful in the proceedings;

    i)Whether any party has made an offer in writing; and

    j)Such other matters as the court considers relevant the weather any parties been wholly unsuccessful in the proceedings.

    [4] Above, note 1.

    [5]Family Law Act 1975 (Cth).

    [6]Family Law Act 1975 (Cth), s 117(2A), (4), (4A) and (5).

    [7]Family Law Act 1975 (Cth), s 117(2A).

36. This is a matter where it is clear as it can be that I should exercise my discretion to make a costs order given the conduct of the husband and his abject failure to comply with orders of this court from the chronology I have previously read out . The wife has been required to come to court in order for orders made by this court to be carried out and in particular to protect her interest in the proceedings.

37. The husband in contravention of Orders made by Judge Boyle in 9 July 2018 caused monies in his solicitors trust account to be disbursed, this resulted in the wife being properly concerned as to the $100,000 to be paid by the purchaser pursuant to the special condition 17 in the contract for sale from the Suburb K property and it was necessary for her to bring the matter back to court to protect her interest in that money.

38. The husband failed to advise the wife the two caveats to be registered over the title to the property at Suburb D.

39. The Husband failed to vacate the Suburb D property within four weeks of the Orders made by Justice Rees in October 2018 and the wife was required to bring an application for his ejectment from that property. The husband has failed to comply with an order to produce a contract in which it is asserted he over owes Mr G $550,000 or any contract at all.

40. The husband left court when the matter was before Justice Loughnan on 6 March 2019 before his Honour was able to deal with the matter necessitating a further adjourned date thus the legal fees incurred by the wife on that occasion were thrown away.

41. On the adjourned return date of 14 March 2019 before Justice Harper the husband had not filed any documents in response to the wife’s Application in a Case, turned up unrepresented and sought an adjournment for to obtain a Mandarin interpreter. The costs and disbursements incurred by the wife on that occasion were thrown away.

42. The husband’s conduct has been an affront to both the court, the court proceedings, and, in particular, his former wife and her legal team. The circumstances of the case that have weighed on my mind is the husband’s conduct and it is at the extreme end of a contemptuous attitude displayed towards orders of a court seized with jurisdiction to deal with assets and property. His behaviour is improper and derelict and it is an imperative that the court acts to do all it can to ensure this behaviour does not continue into the future. Therefore, it is appropriate that I exercise my discretion under section 117(2)[8] to depart from usual order and consider making a costs order in the wife’s favour.

    [8] Above, note 1.

43. The issue of whether I ought order indemnity costs is now the matter that I will consider. There is voluminous case law in relation to this issue set out in matters such Prantage[9], Stephens[10], Penfold[11], and Kohan [12].

    [9]Prantage & Prantage (2013) FamCAFC 105.

    [10]Stephens & Stephens [2010] FamCA 184.

    [11]Penfold v Penfold (1980) 144 CLR 311.

    [12]Kohan & Kohan (1992) 16 Fam LR 245.

44. In the decision of Kohan[13] the Full Court consisting of their Honours Strauss, Lindenmayer and Bulley found as follows:

    In an appropriate case the court has discretion to order costs on an indemnity basis and such costs may be awarded where there have been incurred under a costs agreement which departs from usual scale of costs that is the case here.

    [13] Above, note 12.

45. Their Honours went on to say:

    It is fundamental to the exercise of that discretion in the court the judge should not only understand that such an order is a very great departure from the normal standard but also that the judge should know what the terms of the agreement along, what extended exceeds the parameters set by the scale and what is like it is what is its likely impact will be on the financial position of each party is.

1. The wife has set out in her submissions the costs she has incurred preparing, defending and prosecuting her various interim applications seeking to enforce orders made by the court or protecting matrimonial assets. The wife has also set out in detail disbursements, being Counsel’s fees incurred. At paragraph 94 of the written submissions the wife’s legal costs associated with each court appearance on 6 March 2019, 14 March 2019 and 19 March 2019 have been broken down and her total costs for these three occasions is $22,547.92. This is her claim.

2. I am satisfied that the cost claimed by the wife have been incurred by her in accordance with the costs agreements the wife entered into on 5 September 2018 and 4 March 2019 as annexed to her costs submissions.

3. The cost sought by the wife is a significant departure from the scale, however, as their Honours set out in Kohan[14]:

   Where the justice of the matter requires it the court may make such order as it considers just. It may depart from the scale prescribed in the rules but should not depart lightly from the ordinary rules of the court.

   [14] Above, note 12.

4. The principle set out in Colgate-Palmolive[15] are also relevant:

   Are there special or unusual features in a matter and in this case to justify my departure from the norm in order for indemnity costs?

   [15]Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536.

5. His Honour Sheppard J went on to say:

   It is the ordinary rule is that where the court orders the cost of one party to litigation to be paid by another, the order is for payment of those costs on a party/party basis.

   This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation or decision of an intermediate Court of Appeal or of a High Court report would be required to alter it.

6. In consequence of the settled practice which exist the court ought not usually make an order for payment of costs on some other basis other than the party/party basis. The circumstances the case must be such as to warrant the court in departing from the usual order.

7. His Honour went on to observe some of those circumstances as follows:

   a)Irrelevant allegations of fraud;

   b)Misconduct the causes a loss of time to the court and other parties;

   c)Whether proceedings were commenced or continued for an ulterior motive;

   d)The undue prolongation of the case on groundless contention; and

   e)Wilful disregard of known facts in clearly established law.

8. It is clear the husband’s behaviour amounts to misconduct and has caused the court and the wife to suffer a significant loss of time. The finding of special and unusual features is a significant factor in matters involving indemnity costs.

9. There are special and unusual circumstances in this matter which revolve around the conduct of the husband in the proceedings which I have set out and which support a departure from the norm such that I ought to order indemnity costs in the exercise of my discretion and those special and unusual circumstances are as follows.

10. The husband failed to comply with the orders made 8 October 2018 to vacate the property at L Street, Suburb D within four weeks of those orders being made. He did not vacate the property until February 2019. This necessitated the wife bringing an application to the court for his ejectment and resulted in her having insufficient funds to carry out necessary renovation per repair work to the property as recommended by the real estate agent for the purposes of the sale.

11. The husband failed to ensure that the proceeds of sale of the Suburb K property after payment of disbursements which totalled $40,580.68 was held in a controlled monies account by his lawyers and had directed his lawyers to disperse those monies such that on 25 February 2019 the wife discovered there was only $1,795.68 in his solicitors trust account with P Lawyers in breach of Orders made 9 July, 30 July and 8 October 2018.

12. This breach resulted in the wife being properly concerned that a further sum of $100,000 to be paid by the purchases of Suburb K property pursuant to special clause 17 yet to be paid, and again to be held in a controlled monies account would be dispersed at the direction of the husband. This justified concern was a further impeller for the wife to bring her interim application on filed 28 February 2019 to protect matrimonial assets.

13. The husband failed to disclose to the wife that two caveats had been placed over the title to the property at Suburb D and although this is not a breach of a court order it certainly falls within the husband’s knowledge and within the order made by Judge Boyle that he was prohibited from encumbering, pledging, charging or creating any lien over the property.

14. The husband failed to comply with Orders made 9 March 2019 to disclose to the wife the purported loan agreement between he and Mr G which is asserted by Mr G supports the caveat on the Suburb D property. This failure was also part of the wife’s interim application filed 28 February 2019.

15. On the first return date of the wife’s application filed 28 February 2019 namely 6 March 2019 the husband left to the court building prior to the matter being dealt with by his Honour Justice Loughnan. His stated reason that he was required to take his daughter C to sports indicates his contempt for the court and its proceedings. This necessitated an adjournment and the costs the wife had incurred on 6 March 2019 were wasted due solely to the conduct of the husband.

16. On the adjourned date on 6 March 2019 the husband had failed to file a Response or Affidavit to the wife’s Application in a Case and attended without representation before Justice Harper. He again sought the proceedings to be adjourned and require the assistance of an interpreter. This matter was then further adjourned to 14 March and an interpreter order to assist him. The costs the wife had incurred on the adjourned date of 14 March 2019 were wasted due solely to the conduct of the husband.

17. The matter came before me on 19 March 2019 and still the husband had not filed any Affidavit in accordance with Justice Harper’s Orders or produced any document he had been ordered to produce and the majority of the orders were agreed to as the husband was ably represented by Mr Green of Counsel.

18. This conduct of the husband clearly, as I see it, falls within the category of special and unusual and has caused the wife to incur significant unnecessary legal fees due only to her requirement to return the matter to court on various occasions to ensure orders of the court were carried out by the husband and to protect matrimonial assets.

19. As Judge Boyle said at the hearing in 9 April 2018 and in her judgment at paragraph 31 the various discrepancies in the husband’s Financial Statement made his financial position difficult to understand.

20. In her judgment delivered 15 January 2019, Justice Rees did not accept the husband’s assertions he had no income and she too referred to Judge Boyle’s decision and the concerns that her Honour had raised as to the veracity of financial information provided by the husband stating:

    ‘It is not necessary to detail her Honour’s findings but it is sufficient to say that her Honour did not accept that the husband’s account of his financial transactions was reliable and specifically referred to a number of purported loan agreement which were questionable as to their validity.

21. Nothing has changed today and his conduct makes his financial circumstances difficult to ascertain. He has failed to comply with notices to produce and produce purported loan agreements on numerous occasions.

22. Thus, I am unable to ascertain whether he has the resources to pay a costs order, however, it is clear, being or alleging being impecunious is no reason not to make an order for costs.

23. Given the provision of rule 19.18(3)[16] that in making an order for costs the court may consider at subparagraph (b)[17] the reasonableness of each party’s behaviour, I have formed the view it’s proper I order the wife’s costs on an indemnity basis to be paid by the husband within 30 days of today’s date in the sum of $22,547.

    [16]Family Law Rules 2004 (Cth), r 19.18(3).

    [17]Family Law Rules 2004 (Cth), r 19.18(3)(b).

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Henderson delivered on 19 June 2019.

Associate:

Date: 20 June 2019