Viola and Latham and Ors

[2016] FamCA 354

FAMILY COURT OF AUSTRALIA

VIOLA & LATHAM AND ORS [2016] FamCA 354

FAMILY LAW – COSTS – Application for costs of proposed respondents arising out of the wife’s unsuccessful action for leave to bring proceedings on behalf of companies pursuant to s 237 of the Corporations Act 2001 (Cth) – whether the wife’s application was an application pursuant to the Corporations Act 2001 (Cth) or the Family Law Act 1975 (Cth) – held that the wife’s application is not an application incidental to the property proceedings between she and the husband – where the proposed respondents are not parties to the property proceedings – finding that costs should follow the event – interim orders made for the wife to pay the costs of the proposed second and third respondents forthwith

Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)

Markoska & Markoska and Anor (Costs) [2011] FamCA 833; (2012) 46 Fam LR 598

APPLICANT: Ms Viola

FIRST RESPONDENT:	Mr Latham
PROPOSED SECOND RESPONDENT:	Mr Baxter

PROPOSED THIRD RESPONDENT: D Pty Ltd

PROPOSED FOURTH RESPONDENT: E Pty Ltd

FILE NUMBER: MLC 5668 of 2012

DATE DELIVERED: 16 May 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATES: In chambers (by written submissions)

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr R Peters

SOLICITOR FOR THE APPLICANT: Taussig Cherrie Fildes

COUNSEL FOR THE FIRST RESPONDENT AND THE PROPOSED FOURTH RESPONDENT: Mr S Hay

SOLICITOR FOR THE FIRST RESPONDENT AND THE PROPOSED FOURTH RESPONDENT: Kennedy Partners

COUNSEL FOR THE PROPOSED
SECOND AND THIRD RESPONDENTS: Dr E Boros

SOLICITOR FOR THE PROPOSED SECOND AND THIRD RESPONDENTS: Norton Gledhill

Orders

IT IS ORDERED THAT

1. The wife pay the costs of the proposed second and third respondents of and incidental to the wife’s Application in a Case filed 18 December 2014, as amended on 16 January 2015 and further amended on 13 February 2015.

2. The costs in paragraph 1 herein be agreed within 21 days of the date of these orders, or failing agreement, be assessed forthwith on a party-party basis, and payable immediately upon agreement or assessment.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Viola & Latham and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 5668 of 2012

Ms Viola
First Applicant

And

Mr Latham
First Respondent

And

Mr Baxter
Proposed Second Respondent

And

D Pty Ltd
Proposed Third Respondent

And

E Pty Ltd
Proposed Fourth Respondent

REASONS FOR JUDGMENT

1. On 6 October 2015 I dismissed the wife’s application pursuant to s 237 of the Corporations Act 2001 (Cth) (“the Corporations Act”) for leave to bring derivative proceedings against the husband, Mr Baxter (“the proposed second respondent”), D Pty Ltd (“the proposed third respondent”) and E Pty Ltd (“the proposed fourth respondent”) on behalf of B Pty Ltd (“B”) and C Pty Ltd (“C”).  On that date I also made orders that on or before 4.00 pm on 27 October 2015 the parties file any submissions in support of any application for costs arising out of or incidental to the hearing of the matter. On 27 October 2015 the proposed second and third respondents filed their submissions in support of their application that:

   1. The [wife] pay the costs of the proposed second and third respondents of and incidental to the [wife’s] application in a case filed 18 December 2014, as amended on 16 January 2015 and further amended on 13 February 2015.

   2. The costs in order 1 be agreed within 21 days of the date of these orders, or failing agreement, be assessed forthwith on a party-party basis, and payable immediately upon agreement or assessment.

2. On 9 November 2015 I made orders by consent that the costs of the wife, the husband and the proposed fourth respondent arising out of or incidental to the hearing of the wife’s application be reserved to the final hearing.

3. In accordance with the orders made on 6 October 2015 the wife filed a response to the submissions of the proposed second and third respondents on 17 November 2015.

4. On 20 November 2015 the proposed second and third respondents filed a reply to the submissions filed on behalf of the wife with respect to what they said were issues to which they had not had an opportunity to respond. The wife did not object to the proposed second and third respondents filing further submissions.

5. Counsel for the proposed second and third respondents submitted in summary as follows:

   ·That the wife’s application was an application under the Corporations Act and not the Family Law Act 1975 (Cth) (“the Family Law Act”);

   ·That the usual order in the context of an unsuccessful application for leave pursuant to s 237 of the Corporations Act is for that application to be dismissed with costs; and

   ·That although there may not be a presumption in all courts exercising jurisdiction under the Corporations Act that costs should be payable forthwith rather than at the conclusion of the main proceedings, there are factors which have been recognised as significant when the court determines whether or not the costs of an interlocutory matter should be paid forthwith including:

   othat the dismissal of the application has determined a discrete issue;

   othat there is likely to be a long delay before the conclusion of the main proceeding; and

   othat the costs of the respondent defending the application were unnecessarily increased.

6. The wife’s case is that her application pursuant to the Corporations Act was “an incidental proceeding in the course of or in connection with a proceeding”, that proceeding being in relation to concurrent, pending or completed proceedings of a kind referred to in paragraphs (a) to (eb) of the definition of matrimonial cause in s 4 of the Family Law Act (in this case the s 79 property proceedings between the husband and the wife) and that in those circumstances the Court’s power to make an order for costs in this case lies in s 117 of the Family Law Act.   

7. In Markoska & Markoska and Anor (Costs) [2011] FamCA 833; (2012) 46 Fam LR 598 Murphy J said at paragraph 96 as follows:

   The word “incidental” should bear its natural meaning: “happening or likely to happen in fortuitous or subordinate conjunction with something else” or “to happen in connection with” or “naturally appertaining to” (Butler, S, (ed), Macquarie Dictionary, 5th ed, Macquarie, 2009) or “liable to happen” or “naturally attaching” (Shorter Oxford English Dictionary, 4th ed, Oxford University Press, 1993). Used in any of those senses, the r 15.23(3) proceeding between the firm and the wife can be seen as incidental to the substantive proceedings between the husband and the wife.

8. The substantive proceedings in Markoska& Markoska (supra) were property proceedings between the husband and the wife. The “incidental proceeding” in that case was an application by a third party, the legal firm that had previously acted on behalf of the husband, as against the husband and/or the wife pay for reimbursement of its costs of complying with a subpoena issued by the wife pursuant to Rule 15(23)(3). Whilst Murphy J found that the application for costs against the wife pursuant to r 15.23 of the Family Law Rules 2004 (Cth) was incidental to the property proceedings the circumstances in this case are in my view very different.

9. I accept as submitted by counsel for the second and third proposed respondent that the application pursuant to s 237 of the Corporations Act is a stand alone proceeding which, had they been successful, would have led to the commencement of a new proceeding in the name of B and C. It cannot in my view  be described as naturally appertaining or attaching to the property proceedings and it follows therefore that it is not “incidental” to those proceedings.  .

10. As counsel for the second and third proposed respondents submitted it was the wife who initiated proceedings and the second and third proposed respondents were unwilling respondents who successfully opposed the wife’s application. The discrete application to which they were parties has been determined and they have no further part or any financial interest in the proceedings between the husband and the wife. On the other hand the property proceedings between the husband and the wife have been on foot for many years. The property proceedings have been listed for final hearing on four occasions. On each occasion the hearing has been adjourned. Although they have once again been listed for final hearing in September 2016, even if the hearing does proceed on this occasion it is likely to be some time before judgment is delivered and there is always the possibility of an appeal.

11. I am satisfied that there is in this case no reason why the Court should depart from the usual practice of costs following the event and in those circumstances the wife being ordered to pay the costs of the proposed second and third respondents. I am satisfied that, in circumstances where the proposed second and third respondents are not parties to the property proceedings and the discrete application to which they were a party has been determined, those costs should be payable forthwith.

12. Even if the source of the Court’s power to make an order for costs does lie in s 117 of the Family Law Act I am in any event satisfied that in this case there are circumstances which would justify the Court departing from the general rule that in proceeding under the Family Law Act each party should bear their own costs. As counsel for the wife submitted, the Court must, in determining what if any order it should make, consider the matters in s 117(2A) of the Act.

13. Although I found that that I was not satisfied on the balance of probabilities that the wife had the capacity to fund the proposed derivative action, satisfy any order for security for costs if one were to be made or stand behind any indemnity it does not necessarily follow that the wife does not have the capacity to meet an order for costs in these respect of these proceedings. I note in this regard my findings with respect to her assets based upon her Financial Statement filed 4 March 2015.

14. Although it is submitted that both the proposed second and third respondents have significant financial means, there is no evidence based upon which I could be satisfied that that is the case or that even if they did that would be determinative of the matter other than the fact as noted in my reasons that neither respondent submitted that they were not in a position to comply with any orders the Court might make. I am not satisfied that the financial circumstances of either the wife or the proposed second and third respondents would lead me to conclude that the Court should either make or not make an order for costs.

15. Although I found that the wife was acting in good faith and I was satisfied that there was a question to be tried I did not make any findings as to either the conduct of the proceedings or the conduct generally of either the proposed second or third respondent nor in circumstances where the evidence was not tested would it have been possible to do. Counsel for the wife submitted that the proposed second and third respondent failed to make obvious concessions, that the Court should not have had to decide these points and that any costs order should reflect that conduct in having failed to make those concessions. I do not accept that submission. I am satisfied that the proposed second and third respondents had an arguable case and were entitled in those circumstances to put that case notwithstanding that their case on those points was ultimately not successful.

16. Counsel for the wife submitted that whether the wife could be said to be wholly unsuccessful depended in this case upon whether the Court looked at the outcome of her application or the individual criteria she was required to meet in order for her application to succeed. Whilst it is true that the wife did satisfy four of the five criteria in my view that is somewhat meaningless in circumstances where as submitted by counsel for the proposed second and third respondents the court does not have a discretion to grant leave if some but not all of the criteria are satisfied. The wife issued her application in the knowledge that she needed to satisfy all of the criteria and in circumstances where she failed to do so I am satisfied that her application was wholly unsuccessful.

17. There is in this case no evidence of any offer being made in writing nor were the proceedings necessitated by the failure of any party to comply with previous orders.

18. In all of the circumstances the proposed second and third respondents being unwillingly respondents to the wife’s discrete application that she be granted leave pursuant to s 237 of the Corporations Act and having successfully opposed that application, that application in my view not being incidental to the property proceedings between the husband and the wife, I am satisfied that the Court would be justified in making an order for costs against the wife.

19. In all of the circumstances I propose to make the orders sought by the proposed second and third respondents.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered 16 May 2016.

Associate:

Date:  16 May 2016