Vasilias and Vasilias (Costs)

[2008] FamCA 420

FAMILY COURT OF AUSTRALIA

VASILIAS & VASILIAS (COSTS) [2008] FamCA 420

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

Knight v FP Special Assets Limited (1992) 174 CLR 178
McAlpin & McAlpin (1993) 16 Fam LR 888

APPLICANT WIFE: Mrs Vasilias

RESPONDENT HUSBAND: Mr Vasilias

RESPONDENT PATERNAL

GRANDPARENTS:

Mr and Mrs Vasilias (Snr)

THIRD RESPONDENT: Mr RW

FILE NUMBER: MLF 3158 of 2005

DATE DELIVERED: 6 June 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: BY WAY OF WRITTEN SUBMISSIONS

JUDGMENT OF: Cronin J

HEARING DATE: BY WAY OF WRITTEN SUBMISSIONS

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT: HOGG & REID

SOLICITOR FOR THE RESPONDENT

PATERNAL GRANDPARENTS:

S KOURKOULIS & ASSOCIATES

Orders

1. That the paternal grandparents contribute towards the wife’s costs of the proceedings set out in the amended application filed on 28 February 2008 in the sum of $2354 such sum to be offset against any payment by the wife to the husband’s parents pursuant to the orders made on 12 March 2008.

2. That Mr RW contribute towards the wife’s costs of the proceedings set out in the amended application filed on 28 February 2008 in the sum of $2354 such sum to be offset against any payment by the wife to Mr RW pursuant to the orders made on 12 March 2008.

3. That all outstanding applications be otherwise dismissed and all proceedings be removed from the list of cases awaiting a hearing.

IT IS NOTED that publication of this judgment under the pseudonym Vasilias & Vasilias (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLF 3158 of 2005

MRS VASILIAS

Applicant

And

MR VASILIAS

Respondent

And

MR AND MRS VASILIAS (SNR)

Respondent Paternal Grandparents

And

MR RW

Third Respondent

REASONS FOR COSTS JUDGMENT

1. By written submission, the wife seeks costs against her parents-in-law on the one part and Mr RW on the other part.

2. Each of these persons lodged a caveat against the former matrimonial home.  The costs claim arises out of proceedings brought by the wife to have the caveats removed.

3. On 22 February 2008, the wife filed an application in a case seeking relief in relation to the caveat lodged by the husband’s parents.  Apparently at that time, she was not aware of the caveat of Mr RW.

4. On 28 February 2008, the wife filed an amended application in a case seeking similar relief against Mr RW.

5. Rule 6.01 of the Family Law Rules 2004 says that a party includes a respondent to an application. To that extent, the filing of the application by the wife made the husband’s parents and Mr RW parties to the proceedings notwithstanding the substantive property proceedings between the husband and the wife had been completed.

6. In the submissions on behalf of the husband’s parents to which I shall turn below, no issue was taken about whether or not the parents were appropriately parties to any proceedings. 

7. In respect of an application for costs, s 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that subject to sub-s (2), each party to proceedings under the Act shall bear his or her own costs. Sub-section (2) provides that if the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to sub-s (2A) make such order as to costs as it considers just. In other words, to depart from the principle that each party pay their own costs, the Court has to be satisfied that there is a circumstance that justifies that.

8. In case there is any argument about whether the husband’s parents and Mr RW are parties to a proceeding under the Act, there is in my view, no longer any doubt that costs orders can be made against persons who are not parties to proceedings.

9. In McAlpin (1993) 16 Fam LR 888 the Full Court referred to a statement by the High Court of Australia in Knight v FP Special Assets Limited (1992) 174 CLR 178. Both the wife and the husband’s parents made reference to the decision of the High Court.

10. In Knight, the High Court said that it was appropriate to recognise a general category of case in which an order for costs should be made against a non-party.  Special mention was made where the non-party had played an active part in the conduct of the litigation or where that person had an interest in the subject of the litigation.  The High Court said that where the circumstances of the case fell within one of those categories, an order for costs could be made against a non-party “if the interests of justice require that it be made”.

11. The reference to the interests of justice is consistent with the clear principle set out in s 117 of the Act.

12. In McAlpin, the Full Court said that the discretion about making an order for costs against a non-party should be exercised sparingly.  Again however as an example, the Full Court referred to the non-party who played an active role in the proceeding and had an interest in the outcome.

13. In this case, both caveators not only have taken an active role in the proceedings in the sense that they have potentially thwarted the carrying out of the intention in the final orders but they also have a very significant interest in getting paid in circumstances where in the substantive proceedings, no specific application had been made for the redirection of funds of the parties towards them.

14. Accordingly, the law in my view is clear that an order for costs can be made against persons such as the husband’s parents and Mr RW. 

15. In this case, I made final orders for property settlement on 31 January 2008. 

16. The husband’s parents lodged a caveat over the former matrimonial home on 14 November 2007 claiming that the husband held the property as trustee pursuant to a constructive trust between the husband and his parents.  It was said that that trust arose out of two loans but particularly one loan that gave rise to the husband acquiring the former matrimonial home prior to the marriage between the husband and the wife. 

17. It was obvious that the monies so provided to the husband had never been pursued by the parents during the relationship between the husband and wife.  It was hard not to be cynical about the suggestion of a desire to reclaim the money after the breakdown of the relationship.

18. Two days after lodging the caveat on 14 November 2007, the husband’s father swore an affidavit which was filed on behalf of the husband for the purposes of the final hearing.  There can be no question therefore that the issue of the caveat was inextricably bound up with the parent’s evidence. 

19. The combination of that affidavit and the subsequent oral evidence by the husband’s father in court showed three particular things.  They were:

    (a)      no caveat was disclosed in the affidavit or the oral evidence;

    (b)no claim for an interest in the property was made in the affidavit or the oral evidence; and

    (c)there was no serious claim for repayment being made as a result of the oral evidence given.

20. The wife did not become aware of the caveat by the parents until four days after the judgment was delivered in January.  In case it might be argued that she should have searched the title, one might equally ask why the husband did not disclose it let alone the parents raise it in the material filed on behalf of the husband. 

21. As a result of the caveat being brought to the wife’s attention, a request was made for its removal.

22. The evidence of the solicitor for the wife showed that in the weeks that followed the discovery of the lodgement of the caveat, attempts were made to negotiate a resolution but they failed.  That precipitated the wife’s application seeking the relief to which I have referred. 

23. I heard from the parties on 26 February 2008 and later on 12 March 2008. 

24. An agreement was reached between the parties that effectively amounted to a garnishment order under which the wife is to pay the parents rather than the husband as I had ordered. 

25. I then turn to the question of the caveat of Mr RW.

26. Mr RW had been a witness for the husband in the property proceedings.  He had filed an affidavit.

27. Mr RW lodged a caveat on 14 February 2008, that is, well after the judgment was released. 

28. Mr RW claimed to have lent the husband money prior to the commencement of the final hearing but certainly after the proceedings between the husband and wife were well underway. 

29. The husband led no evidence during the hearing about any of this and certainly did not disclose what appeared to be a document creating a personal debt of the husband to Arthur RW. 

30. There seems to have been no negotiation in February 2008 between the solicitor for the wife and Mr RW about the caveat nor realistically, could there have been.  Whilst the wife was dealing with the husband’s parents’ caveat, the Mr RW caveat had not been lodged.

31. In bringing the proceedings to court concerning the parents, the wife then had to bring in Mr RW.

32. Mr RW was represented by his solicitor.  He filed no material.  I said at the time, the caveat did not seem to be supported by a charge over the former matrimonial home.  As I have pointed out, Mr RW was ultimately also a party to the pragmatic settlement solution. 

33. As a result of issuing the proceedings, the wife now seeks costs against the husband’s parents and Mr RW.  I made provision for all parties to file written submissions.  The wife filed her submissions on 29 April 2008.  The husband’s parents filed submissions on 2 June 2008.  The solicitor for Mr RW asked for an extension of time until 31 May 2008 and counsel for the wife at that time agreed.  However, no submission was received.  Notwithstanding that the husband had been a party to a number of hearings, he filed no submissions either.

34. The wife’s position in relation to costs was set out in a very comprehensive submission.  It included the history of the proceedings. 

35. The wife submitted in respect of the parents that they had been wholly unsuccessful notwithstanding that on 12 March 2008, orders were made that reflected a pragmatic approach.  That approach should have occurred, according to the wife, in communications prior to the caveat proceedings occurring.  She further submitted that the transactions did not involve her and that the parents could have resolved the matter with their son.

36. In respect of Mr RW, the wife submitted that the transaction did not involve her at all and that Mr RW had no standing whatsoever to lodge a caveat against the property nor had he made any reference to any of the claim in the evidence that he gave on behalf of the husband in the proceedings. 

37. The husband’s parents submitted that the Court had to consider the hardship that would be experienced by them having been brought into the litigation between the husband and the wife.  It was submitted that if there was to be any order for costs favouring the wife, those costs should be met by the husband. 

38. The parents’ submission pointed to the fact that they had had a very limited role in the proceedings and as a result, relying on what was said in Knight’s case, any order against them should be approached with caution. 

39. The parents further submitted that if there was any justification for departing from the principle that each party pays their own costs, then the provisions of s 117(2A) had to be contemplated. According to the submission, the parents are elderly and in receipt of an aged pension having no other source of income. They pointed to the fact that their financial circumstances were unlikely to change and were in fact deteriorating as a result of the financial strain placed on them as a result of not only health but also these particular proceedings. They are apparently not in receipt of legal aid. The wife is not in receipt of legal aid either.

40. The husband’s parents pointed to the fact that the matter had been resolved by a common sense and practical solution on 12 March as between the second and third respondents but that as a result of that, they had accepted a reduced amount so that the children’s school fees could be paid as I had determined under the orders that I delivered in January 2008.

41. Importantly, the following statement appeared in the submission:

    At no time have the Second Respondents refused to remove the caveats.  The removal of caveats has in (sic) been conditional upon payment of the moneys owed.  The wife was not required to run the proceedings to completion with the Court making a finding but rather with the assistance of the Second and Third Respondents a workable compromise was obtained.

42. In this case, the circumstances justify a departure from the principle that the wife should pay her own costs.  The parents adopted a position forcing the wife to go to court.  They pointed to the fact that she did not have to litigate as against them and ultimately there was a compromise as between the second and third respondents.  Ironically however, it was nothing to do with the wife because it was simply a redirection of funds that the wife had to pay to the husband.  The only inference I could draw is that the parents did not accept the judgment.  They were quite content to put the wife to the trouble rather than obtaining the funds as they should have, from the husband.  The best evidence of that is the pragmatic or common sense outcome.  All of that could have been done without the wife having to resort to court.  In so far as it might be said by the parents that the husband would not have paid them, they had remedies that they did not pursue.

43. In respect of Mr RW, he signed the document relating to the loan prior to the commencement of the final hearing but did not lodge his caveat until after the judgment was released.  In so far as his loan was with the husband, there could be no logical reason for a caveat in circumstances where the debt was claimable only against the husband.  That leaves aside any question of whether there was a caveatable interest in the first place.  What Mr RW should have done was to have sought money either directly from the husband or, if he was at all concerned about not being paid, he could have taken garnishment proceedings in his own right.  Ironically, in the hearing, when giving evidence, he seemed quite content to do matters on a handshake basis and was prepared to lose money yet in this case, he resorted to a written loan agreement.  Interestingly, he did not mention the loan agreement in the hearing.

44. In the circumstances, there was no logical reason why he had to effectively thwart the completion of the settlement transactions as between husband and wife and in those circumstances, the wife had no choice other than to bring the proceedings that she did.  The circumstances therefore justify a departure from the rule that the wife should pay her own costs.

45. In relation to the question of the husband being ordered to pay the costs, having regard to what I have just said about the relationship as between the husband and his parents, I see no reason to involve the husband and place any further responsibility on him.  In so far as there is any fault on the husband’s part, the parents could have taken action as against him.  What they did however was to involve the wife in my view unnecessarily.

46. Before contemplating whether an order should be made however, I am obliged to consider the matters set out in s 117(2A) of the Act.

47. The provisions in sub-s (2A) apply to not only the applicant for the costs but also the persons against whom orders are sought.

48. In respect of the wife, I am satisfied that her financial circumstances are dire.  I was informed that her entitlement to legal aid had ceased.  Her endeavours to resolve the matter had been thwarted and she had incurred further costs.  It was not a pleasant picture.  I understand from the submission that the parents are not in a strong financial position but they do have the benefit of money being paid to them by the wife pursuant to the pragmatic agreement to which I have referred in circumstances where I was quite satisfied that they were never going to seek a refund of the money from their son.  In those circumstances, they are in a much stronger position than is the wife.  As for Mr RW, I know little about his financial circumstances other than what he told me when he was a witness in the proceedings.  He said that he was running a business similar to that of the husband and there were significant sums of money changing hands each day.  At the time that these proceedings for removal of the caveats commenced, he was overseas in Greece.  Accordingly, I conclude that he is not in financially difficult circumstances. 

49. I have already mentioned the issue about legal aid and I am informed by the submission on behalf of the parents that they are not the recipient of any grant. 

50. A fundamental principle in relation to the determination of what, if any, costs should be ordered relates to the conduct of the parties to the proceedings.  That is a very wide-reaching provision but it seems to me in this case that the action taken by the parents after being requested to remove the caveat and the action taken by Mr RW in lodging the caveat, indicate that they had not properly considered that a more appropriate approach was to deal with the husband.  In my view, they have considerably contributed to the dilemma.  It is important to point out that an order for costs is not intended to punish someone but rather to alleviate or ameliorate the position of the person who has had to participate in the proceedings unnecessarily.  That is exactly what has occurred here. 

51. I am satisfied that notwithstanding the pragmatic outcome, both the parents and Mr RW have been wholly unsuccessful in the sense that they have taken a course of action involving the wife which was unnecessary and in my view, inappropriate.

52. I am also concerned that the parents had adopted a stubborn approach fully knowing that the issue was more appropriately determined with their son.  Even had that meant further proceedings with them as applicants against the husband, it would have meant that the wife would not have had to have been involved other than indirectly. 

53. In the circumstances therefore, it is appropriate that the husband’s parents and Mr RW contribute towards the wife’s costs.

54. As part of any order for costs, the exercise of discretion requires a court to look at what is an appropriate amount in the circumstances. If the discretion cannot be exercised because of any uncertainty about what is the appropriate amount, an appropriate order should be made for the parties to reach agreement on the quantum based upon the scale set out in the schedule to the Family Law Rules. In this case however, having regard to what has occurred subsequent to the entry of the final orders, that would be inappropriate in circumstances where the wife has set out the quantum in very simple and clear terms. In my view, looking at the costs claimed, they are remarkably modest and I have no hesitation in saying that I think that the quantum is reasonable in the circumstances.

55. The unusual feature of this case is that it is the wife who has to pay the husband via a garnishment order, sums to the parents and Mr RW.  In the circumstances, it is appropriate that each of those persons pay one half of the total of $4708 being $2354 each and that those sums be deducted from the monies to be paid by the wife.  I propose to make orders accordingly.

I certify that the preceding Fifty Five ( 55 ) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  6 June 2008