Wei & Xia (No 7)
[2024] FedCFamC1F 627
•18 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Wei & Xia (No 7) [2024] FedCFamC1F 627
File number(s): SYC 196 of 2017 Judgment of: HARPER J Date of judgment: 18 September 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the husband files enforcement application in respect of costs order made against the wife in 2018 requiring payment of costs to the husband as agreed or assessed on a party and party basis – Where the final orders in the substantive proceedings require the husband to pay the wife $9,284 – Where the husband seeks the amount to be paid by him be offset against the amount owed by the wife pursuant to the 2018 costs order – Where the husband did not have his costs assessed and quantified by a registrar pursuant to Div 12.8.2 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“2021 Rules”) – Whether the 2018 costs order constitutes an enforceable “obligation to pay money” under the 2021 Rules – Where the absence of assessment of the husband’s costs is not an insuperable obstacle to ordering a set off – Power of the Court to make orders declaring amount owed under an obligation pursuant to r 11.07 of the 2021 Rules – Where the amount owed by the husband is set off against the amount owed by the wife, quantified in the same amount of $9,284 – Where there is no balance to be paid by the wife.
FAMILY LAW – JURISDICTION – Inherent jurisdiction to order set off of liquidated sum against unliquidated sum – Distinction between costs order and judgment for damages is unimportant to discretion to order set off – Where it is unnecessary to decide if the Court should exercise equitable jurisdiction to order set off.
Legislation: Family Law Act 1975 (Cth) Pt VIII, s 105
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Family Law Rules2004 (Cth) (repealed) Div 19.6.2, rr 19.21, 19.22
Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) Pt 11.1 and Pt 12, Div 12.8.2, rr 1.04(1), 1.05(1), 11.01, 11.07
Cases cited: Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184; [2006] NSWSC 560
Collins & Olsthoorn (2005) FLC 93-216; [2005] FamCA 138
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56
Haines & Rader (No 5) [2023] FedCFamC1F 132
Hunter & Hunter [2019] FamCA 40
Lahoud v Lahoud [2012] NSWSC 284
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1567
McDonald and McDonald (1976) FLC 90-047; [1976] FamCA 29
McMillan & McMillan [2016] FamCA 387
Newett & Newett (No 8) (2023) FLC 94-128; [2023] FedCFamC1A 7
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; [1988] HCA 11
Wei & Xia (2024) FLC 94-186; [2024] FedCFamC1A 65
Wei & Xia (No 5) (2023) 67 Fam LR 421; [2023] FedCFamC1F 679
Wei & Xia (No 6) [2024] FedCFamC1F 545
Division: Division 1 First Instance Number of paragraphs: 39 Date of last submission/s: 16 September 2024 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: GWH & Associates Solicitor for the Respondent: Metro North Legal ORDERS
SYC 196 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WEI
Applicant
AND: MR XIA
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
18 SEPTEMBER 2024
THE COURT DECLARES THAT:
1.The Applicant Wife (“wife”) is obliged to pay the total amount of $9,284 to the Respondent Husband (“husband”) to comply with Order 2 made on 15 May 2018.
THE COURT ORDERS THAT:
2.The obligation of the wife stipulated in Order 1 is hereby set off against the obligation of the husband to pay $9,284 pursuant to Order 5(g) dated 16 August 2023.
3.The obligation of the husband stipulated in Order 5(g) dated 16 August 2023 is discharged by reason of Order 2 above.
4.The Amended Application – Enforcement filed by the husband on 19 July 2024 is otherwise dismissed, with no order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonyms Wei & Xia has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
These are property proceedings under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”) between the wife Ms Wei (“the wife”) who was the applicant in the substantive proceedings, and the husband Mr Xia (“the husband”) who was the first respondent in the substantive proceedings. His parents were other respondents but they are not relevant to this judgment.
The proceedings have a long and complex history. I set out the relevant background and procedural history in earlier judgments Wei & Xia (No 5) (2023) 67 Fam LR 421 (“Wei & Xia (No 5)”) (final judgment) and Wei & Xia (No 6) [2024] FedCFamC1F 545. The final judgment, Wei & Xia (No 5) was delivered on 16 August 2023 when final orders were made. The wife’s appeal from these orders was dismissed on 24 April 2024 (Wei & Xia (2024) FLC 94-186).
On 15 May 2018 McClelland J (as he then was) made the following order, which was Order 2 made on that date:
The wife shall pay the husband’s costs on a party-party basis as agreed to or taxed, in respect to the period subsequent to 7 May 2018.
Order 5(g) of the final orders required the husband to pay the wife $9,284 from the proceeds of sale of an item of real estate.
By Amended Application – Enforcement filed on 19 July 2024, the husband sought enforcement of the costs order made on 15 May 2018 by payment of $16,130 by the wife. He proposed the method of enforcement of the 2018 costs order in the following terms:
1.That the Applicant wife comply with order 2 of the Orders made by Justice McClelland on 15 May 2018 and pay the husband’s costs of $16,130.00.
2.That the amount owed by the wife be set off against order 5(g) of the Final Orders made by Justice Harper on 16 August 2023.
On 29 August 2024, I made orders that the wife was to file written submissions in response by the close of registry filing on 5 September 2024. On 16 September 2024, the husband filed an affidavit complaining that the wife’s submissions were filed at 10.59 pm on 5 September 2024 after the registry closed at 4.30 pm. The wife’s submissions were late by a few hours and I will have regard to them.
According to the husband’s affidavit filed 14 June 2024 in support of the enforcement application, by letter dated 12 June 2018, the husband’s then solicitors, DW Lawyers, served upon the wife’s then solicitors, BK Lawyers, an itemised costs account for the period 7 to 15 May 2018 totalling $15,664.55 (annexures “B” and “C” of the husband’s affidavit).
The lawyers for the husband served on the wife’s lawyers a further “Itemised Costs Account” on 10 July 2018 (annexure “D”), and then by email dated 5 October 2018 his lawyers inquired of the wife’s lawyers when the costs would be paid (annexure “D”). It appears a further itemised costs account in accordance with r 19.22 of the Family Law Rules2004 (Cth) (now repealed) (“2004 Rules”) was served on the lawyers for the wife, dated 27 September 2019, claiming $14,663.35, being annexure “E”. Then by letter dated 4 June 2021 the husband’s solicitors served upon the wife an itemised bill of costs although it was unclear whether this bill was annexed to the affidavit and was the same as annexure “E”.
In her affidavit filed on 5 September 2024 the wife disputes annexures “B” and “C” claiming the itemised costs accounts were not in accordance with the 2004 Rules, although she did not deny receiving them or provide any evidence that she disputed them at any time before filing her affidavit. No reply was received by the husband’s lawyers, disputing these costs statements. The wife does not respond in her affidavit to annexure “D”.
The wife did deny receiving annexure “E” as an itemised costs account from the husband, until 2 July 2024 when the husband served his affidavit in support of his enforcement application.
According to her written submissions filed on 5 September 2024 the wife argued this failed to comply with r 19.21 of the 2004 Rules, which were in force until 1 September 2021. Rule 19.21 required a person entitled to party and party costs to serve an itemised costs account “within 4 months after the end of the case”. This expression has been interpreted to mean four months after the disposal of any appeal brought from final orders (Hunter & Hunter [2019] FamCA 40 at [23]).
Much of the material disputed between the parties is not germane to the determination of the central claim of the husband. Where an itemised costs account was disputed under the 2004 Rules, a process of assessment was then required to take place with a registrar (Div 19.6.2). These rules have been repealed, but replicated in Div 12.8.2 of Pt 12 of the Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) (“2021 Rules”) which came into force on 1 September 2021. The short point is that where a party is ordered to pay costs on a party and party basis “as agreed or taxed”, in the absence of agreement, an assessment by the Court in the form of a registrar is required to quantify the liability.
It was the wife’s argument therefore that since the 2004 Rules applied the husband had failed to serve an itemised costs account in accordance with the applicable rules. Even if this is incorrect, it is plain no assessment has been made at any time by a registrar of the Court in accordance with any rules of Court. Therefore, the wife’s argument is that her liability for costs has not been quantified, her liability to pay has not arisen and cannot be enforced. Consequently, there is no ascertained amount to set off against the husband’s liability to pay her $9,284 pursuant to the final orders. This is correct in my view. In the absence of an assessment, the quantum of the wife’s liability to pay costs is not established.
However, that does not determine the husband’s application for a set off, despite the submissions of the wife. For the reasons which follow, there are two bases upon which a set off can be ordered without an assessment, either pursuant to the 2021 Rules or under the Court’s inherent jurisdiction.
Obligation to Pay Money
Section 105(1) of the Act grants a general power of enforcement to the Court subject to the 2021 Rules. Rule 11.01 deals with enforceable obligations. An “obligation to pay money” may be enforced under Pt 11.1 of the 2021 Rules.
An “obligation to pay money” is defined inclusively in r 11.01(2) as follows:
For the purposes of paragraph (1)(a), an obligation to pay money includes the following:
(a) a provision requiring a payer to pay money under:
(i) an order made under the Family Law Act, the Assessment Act or the Registration Act; or
(ii) a registered parenting plan; or
(iii) an award made in arbitration and registered under section 13H of the Family Law Act; or
(iv) a maintenance agreement registered under subsection 86(1) of the Family Law Act; or
(v) a maintenance agreement approved under section 87 of the Family Law Act; or
(vi) a financial agreement or termination agreement under Part VIIIA of the Family Law Act; or
(vii) a financial agreement under Part VIIIAB of the Family Law Act or a termination agreement under Part VIIIAB of the Family Law Act; or
(viii) an agreement varying or revoking an original agreement dealing with the maintenance of a child under section 66SA of the Family Law Act; or
(ix) an overseas maintenance order or agreement that, under the Family Law Regulations, is enforceable in Australia;
(b) a liability to pay arrears accrued under an order or agreement;
(c) a debt due to the Commonwealth under section 30 or 67 of the Registration Act;
(d) a child support liability;
(e) a fine or the forfeiture of a bond;
(f) costs, including the costs of enforcement.
(3) For the purposes of paragraph (1)(a), an obligation to pay money does not include an obligation arising out of costs for work done for a fresh application payable by a person to the person's lawyer.
“Costs” are defined in r 1.05(1) to mean “an amount paid or to be paid for work done by a lawyer, and includes expenses”.
The question is whether the May 2018 costs order constituted an “obligation to pay money”.
In construing the ambit of the expression “obligation to pay money”, the approach of using the text, context and purpose of the rules is well known (e.g. Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]–[70]). But in this Court there is an imperative to interpret the rules starting with the “overarching purpose”. Rule 1.04(1) provides that the overarching purpose of the 2021 Rules, as provided by s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), “is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible”. Section 67(3) requires that the 2021 Rules “must be interpreted and applied, and any power conferred or duty imposed by them…must be exercised or carried out, in the way that best promotes the overarching purpose”.
The evident purpose of r 11.01(2) is to provide examples of what constitutes an “obligation to pay money”. Many of the examples specify ascertained or readily quantifiable liabilities. But not all. In particular an order for costs frequently can be said to create an obligation to pay money before the liability is quantified, in other words, the obligation to pay and the debt or ascertained liability are conceptually distinct. This is a distinction recognised in the law of guarantee. For example, in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, the High Court held that a guarantor’s obligation to pay the purchase price for a property upon the purchaser’s default did not become a debt until settlement and conveyance took place. More to the point, in Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 (“Foots”) the majority held that the obligation to pay costs did not accrue until an award of costs was made (at [35]), and at [25], implicitly recognised a distinction between an obligation to pay costs and the ultimate quantified liability when they said: “although capable of estimation, the actual monetary value of an award of costs cannot be ascertained until those costs are taxed or otherwise assessed”. Thus the obligation to pay money in the form of costs accrues when a costs order is made, even if an ascertained debt arising therefrom requires an assessment to take place where party and party costs are ordered. The order for costs itself creates the liability because such orders turn on discretionary considerations independent of the substantive final judgment, and there is no certainty that the Court will decide to make an order or that any party will move for an order (Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1567 at [61], citing Foots at [24]–[37]).
It is also relevant to point out that in exercising its general powers of enforcement of an obligation to pay, the Court may make orders declaring the amount owed under an obligation to pay money, stating when it must be paid (r 11.07(a) and r 11.07(b)), for enforcement of an obligation to pay money (r 11.07(d)), in aid of the enforcement of an obligation to pay money (r 11.07(e)) or for costs (r 11.07(g)). It seems to me that the power to declare the amount owed under an obligation to pay money itself recognises that the obligation to pay and its quantification can be separate.
In my view, the May 2018 costs order created an obligation to pay money within r 11.01.
The exercise of the powers of enforcement, in r 11.07, is discretionary. In my view, the exercise of those powers should be guided by the general considerations outlined by the authorities concerning the exercise of the powers in s 105 of the Act. The Court may refuse to enforce an order where general notions of fairness dictate that it would be inequitable to do so and that only facts and circumstances arising since the date of the order, including any delay in seeking enforcement, will inform the exercise of discretion (Collins & Olsthoorn (2005) FLC 93-216 at [14]; McMillan & McMillan [2016] FamCA 387 at [38]–[60]; Haines & Rader (No 5) [2023] FedCFamC1F 132 at [113]).
It is somewhat trite, but apposite nonetheless, to observe that a “just resolution” of disputes includes holding parties to their obligations pursuant to Court orders, especially where another party is the direct beneficiary under the order.
I am satisfied the husband’s proposed orders seek enforcement of an obligation to pay money. It is an order under the Act requiring the payment of costs.
Inherent Jurisdiction
In his submissions the husband mentioned equitable set off as a basis for his relief. However, the authorities recognise an inherent jurisdiction as well as a jurisdiction in equity to order a set off, both leading to the same result. The Court has an inherent jurisdiction to protect and control its processes which includes a discretion to order a set off of costs and judgment debts. White J set out the basic principles in Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 at [68]:
…[the] set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same proceedings or in other proceedings (Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618).
Even if some authorities have suggested the set off of a costs order against a judgment for damages, while not wrong in principle, may be less obvious than a set off of a costs order against another costs order, more recent authority has recognised the distinction between costs and damages is unimportant in relation to set off (Lahoud v Lahoud [2012] NSWSC 284 (“Lahoud”) at [75]–[78]).
In Lahoud Ward J (as she then was) continued at [79]–[80]:
79. Therefore, the inherent jurisdiction is rightly invoked where a party, in the course of the same proceedings, pleads a prior order of costs obtained by it against the other party as a defence to a judgment debt. This has been applied in a number of recent English and Australian cases, including Gertig v Davis (2003) SASR 226 (costs set-off against damages in the same action), Dodds v Premier Sports Australia Pty Ltd (No.2) [2004] NSWSC 389 (costs against damages in the same proceedings), and Shine v English Churches Housing Group [2004] EWCA Civ 434 (damages against interlocutory appeal costs).
80. Once properly invoked, however, the availability of set-off is a matter for the Court's discretion, based on similar factors as those taken into account in respect of matters of costs generally ([Lockley v National Blood Transfusion Service [1992] 1 WLR 492 at 497]) (hence the doubt I have as to the proposition that such a set-off would be inevitable). These factors include the public interest, the efficient administration of justice and the conduct of the parties (Miller v DPP (No.2) [2004] NSWCA 249 at [13]). In cases where set-off is concerned, a particularly important consideration is the insolvency of one of the parties (Wentworth v Wentworth (Unreported, NSW Supreme Court, Young J (as his Honour then was), 12 December 1994)). Any delay between obtaining the costs order and having the costs assessed may also be a factor (Miller v DPP (No.2) at [7]-[8]). Logically, there seems no reason why a court would not also take into account in the exercise of this discretion the overall disputes between the parties (and the fairness of a set-off operating at a time that interest on other costs orders between the parties was still running, at least if it was not made clear at that time as to how the set-off was to apply to those interest orders).
It is also important to observe that a set off, whether based in the inherent jurisdiction or in equity, can take place between an ascertained or liquidated sum and an unascertained or unliquidated sum. In Lahoud, Ward J continued at [82]–[83]:
82. I accept that the availability of set-off does not turn on whether or not the sum against which the set-off is to operate (here, the costs orders) is certain (that is, the quantum has been determined) as opposed to uncertain (hence the different character of the two off-setting amounts in the present case is not determinative). This proposition rests on two lines of reasoning. First, with respect to the court's inherent jurisdiction, a number of decided cases have allowed set-off of a costs order against an unliquidated and undetermined sum. Second, with respect to the general equitable jurisdiction, a number of cases also support the proposition that set-off arises between liquidated and unliquidated sums.
83. As to the first, in Sivritas v Sivritas [2008] VSC 580; (2008) 23 VR 349 an application was made for set-off between a costs order and the proceeds from a sale of land. At the time of the application, the sale had yet to proceed and therefore the quantum to be set off against was not determined. Kyrou J, in the course of considering the jurisdiction to grant the application, cited Fryberg J in Team Dynamik Racing Pty Ltd v Longhurst Pty Ltd [2008] QSC 36 in support of the proposition that set-off in respect of costs flows from the Court's inherent jurisdiction rather than its equitable jurisdiction and that the Court's inherent power in relation to costs is general and discretionary. His Honour had there noted that the discretion "ought not to be limited by a search through the categories of equity which ... does not seem ... likely to be a process of greater clarity or certainty than the exercise of an undefined inherent jurisdiction". Kyrou J then went on to say at [21] that:
With respect, there is much to commend Fryberg J's approach. In the ordinary course, the Court adjudicates on the parties' substantive conflicting claims (whether they arise in contract, tort, equity or otherwise), before it makes a decision on costs. While it makes sense to apply the impeachment principle as between the parties' substantive claims, in the sense that one claim may go to the root of, be bound up with or impeach the other claim, it will usually be artificial to describe an order for costs, which is made after the Court has already assessed the parties' claims, as going to the root of, being bound up with or impeaching a claim that the Court has already upheld.
After an extensive consideration of the authorities, Ward J concluded at [92] regarding equitable set off that:
92. …Where liability is uncertain, as opposed to liability being certain and quantum being yet undetermined (such as the unliquidated claim for breach of warranty pleaded successfully in answer to a claim for purchase price of a business in Sun Candies Pty Ltd v Polites [1939] VLR 132), it does not seem that any support may be found … to support a refusal of equitable set-off.
Consequently, it is unnecessary to decide whether this Court should exercise an equitable jurisdiction to set off the wife’s obligation to pay costs under the May 2018 costs order against the husband’s liability to pay the wife $9,284. I am satisfied that this Court has inherent jurisdiction to do so. The principles discussed in Lahoud, and the numerous authorities discussed therein, offer an appropriate and cogent guide to the exercise of the discretion to make an order for set off of the type sought by the husband.
CONCLUSION
The absence of an assessment of the husband’s costs is not an insuperable obstacle to ordering a set off in the exercise of the inherent jurisdiction. The Court has a discretion to order a set off without an assessment.
In addition, and consistently with this jurisdiction, since r 11.07(a) empowers the Court to declare the amount owing, it seems to me that it is also consistent with the overarching purpose to interpret the powers of enforcement in r 11.01 and r 11.07 as conferring a power to declare the amount owing by the wife to the husband pursuant to the May 2018 costs order, irrespective of any failure by the husband to seek an assessment by a registrar under the 2004 Rules and the absence of assessment of party and party costs does not preclude such a declaration where it would not be inequitable and the circumstances arising after the May 2018 costs order support it.
It is true the husband has delayed in taking, indeed has never taken a step to have his costs assessed and quantified, is a factor weighing against the set off. However, I do not consider this factor to be sufficient to deny an exercise of discretion as the husband seeks.
The husband served upon the wife an itemised costs account dated 12 June 2018. He did not delay in seeking a payment of costs, even if he failed to seek an assessment by a registrar. As noted the wife did not dispute the account dated 12 June 2018 until she filed her affidavit in response to the husband’s application presently under consideration.
These proceedings have consumed an inordinate amount of court resources and should be brought to an end in all respects as expeditiously as possible. In light of the long complex history, the requirement to promote, and interpret the rules in accordance with, the overarching purpose, the need to finalise the proceedings as completely in all respects, and the relatively modest amounts involved, all combine to persuade me that a set off such as proposed by the husband would not be inequitable and should be ordered.
The remaining problem is the amount of the set off. The husband’s claimed costs exceed his liability to the wife. However, the quantum of his costs on assessment under the May 2018 costs order could only be estimated for present purposes. The undisputed account dated 12 June 2018 is evidence which allows some understanding of the quantification of the husband’s costs on a basis separately to an assessment by a registrar. There is force in the wife’s submission that these claimed costs, as repeated in the other itemised costs accounts in his evidence, would represent, at least in part, full indemnification. On the other hand, although unquantified, I am satisfied that the husband’s costs on a party and party basis are no less than $9,284, but I cannot be satisfied they are any more. For the purposes of r 11.07(a) I will declare that the wife owes the husband $9,284 pursuant to the May 2018 costs order.
Accordingly, it is appropriate to order the amount to be paid by the husband pursuant to Order 5(g) should be set off against the amount owed by the wife pursuant to Order 2 made on 15 May 2018, quantified in the same amount, that is $9,284, leaving no balance to be paid by the wife, and the husband’s liability to the wife under Order 5(g) discharged.
I will make orders accordingly.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 18 September 2024
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