Woodley & Time and Anor
[2008] FamCA 162
•14 March 2008
FAMILY COURT OF AUSTRALIA
| WOODLEY & TIME AND ANOR | [2008] FamCA 162 |
| FAMILY LAW – COSTS – Between party to a marriage and a third party who had a genuine interest in the property proceedings and where such proceeding between the parties to the marriage may have defeated a Mareva injunction and could have prevented a recovery of a civil judgment against one of the parties to the marriage – Consideration of rights of third parties under s117(2A) Family law Act. |
| Brown v Brown (1998) FLC 92-822 |
| APPLICANT: | MRS WOODLEY |
| 1st RESPONDENT: | MRS TIME |
| 2nd RESPONDENT: | MR TIME |
| FILE NUMBER: | LNC | 134 | of | 2007 |
| DATE DELIVERED: | 14 March 2008 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Launceston |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 20 February 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Gibson |
| SOLICITOR FOR THE APPLICANT: | Zeeman Kable & Page |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Tucker |
| SOLICITOR FOR THE 1ST RESPONDENT: | Grant Tucker |
| FOR THE 2ND RESPONDENT: | No appearance |
Orders
That the application filed 28 February 2007 and the response filed the
23 April 2007 are dismissed.IT IS NOTED
The property proceedings between the first respondent (“the wife”) and the second respondent (“the husband”) have not been determined on their merits.
IT IS FURTHER ORDERED
That the wife pay to the applicant Mrs Woodley the costs of these proceedings including the costs of the costs application. Such costs as agreed between the parties or as otherwise determined under the Family Law Rules.
All outstanding applications be and are dismissed.
All subpoenaed documents be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend
IT IS NOTED that publication of this judgment under the pseudonym Woodley & Time and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT LAUNCESTON |
FILE NUMBER: LNC 134 of 2007
| Mrs Woodley |
Applicant
And
| Mrs Time |
1st Respondent
And
| Mr Time |
2nd Respondent
REASONS FOR JUDGMENT
INTRODUCTION
These are proceedings between the first respondent, (“the wife”), the second respondent (“the husband”) and the applicant (“Mrs Woodley”). The application heard by me on 20 February 2008 was for orders that the wife pay Mrs Woodley’s costs of both the substantive proceedings and the costs in respect of the application for costs. That application was opposed by the wife. The husband did not take part in the costs hearing.
The application in a case seeking costs was filed on 8 February 2008 and returnable before me on 11 February 2008. At that time it was adjourned for hearing to 20 February 2008.
Tendered in evidence was correspondence from Mrs Woodley’s solicitors to the husband’s solicitors dated 11 December 2007 informing them that the cost proceedings were listed before me on 11 February 2008 and that Mrs Woodley would be seeking costs orders. Whilst the husband’s solicitors remained on the record they responded saying that they had no current instructions. On 10 January 2008 the solicitors acting for
Mrs Woodley wrote to the husband, informing him that they would be seeking a costs order against the wife. The husband did not seek to attend nor did he attend through solicitors. I am satisfied he was aware of the proceedings and I infer he has no interest in making submissions as to their outcome.The substantive application for property orders filed by the wife were discontinued by her in June 2007. I intend to dismiss those proceedings and the response by the husband and note that the property proceedings between the husband and the wife have not been heard on their merits.
In these reasons any statement of fact is to be taken as a finding of fact unless the contrary intention is shown.
BACKGROUND
The background to these proceedings is both complex and sad. The primary parties to these proceedings were the husband and the wife who are aged 44 and 40 respectively. They married in September 1994, they had previously commenced in October 1992.
The wife asserts the she and the husband separated on 18 November 2006. There is one child of their marriage, a son who is aged 7.
The husband murdered the applicant’s husband (“the deceased”) some years prior to the parties’ separation. As a consequence of his criminal conviction for that murder the husband is currently serving a term of imprisonment.
The deceased and Mrs Woodley were married in 1988 and have two children.
After the death of her husband, Mrs Woodley commenced proceedings in the Supreme Court of Tasmania against the husband seeking damages arising out of her husband Mr Woodley’s murder by the second respondent (“the civil proceedings”).
The husband had sought bail in the criminal proceedings in respect of the then murder charge pending against him. In support of that bail application the husband relied upon an affidavit asserting that he had assets including a half interest in a property at A and an equity of $40,000.00 in a property at B and that his family trust owned shares in a company which carried on a business.
In April 2002 an order was made in the civil proceedings restraining the husband from dealing with or disposing of any of his assets (the Mareva Injunction[1]). In May 2002, the husband filed an affidavit in the civil proceedings advising that the property at B had been sold and the proceeds of sale had repaid a Commonwealth Bank mortgage and a private loan to his parents. He informed the Supreme Court that he no longer owned any business assets. At that time the evidence was that the husband only had one significant asset, namely the property at A.
[1] Mareva Compania Naviera SA v International Bulkcarriers SA (“the Mareva”) (1980) 1 All ER 213.
In 2006 an offer to settle the civil proceedings was made on behalf of the husband. In that offer the wife had discussed refinancing the jointly owned property to fund the settlement of the civil proceedings. Those civil proceedings were to be the subject of mediation but that did not occur at that time.
Mrs Woodley had taken steps to obtain the Mareva injunction in the civil proceeding to preserve the assets of the husband to enable her children and herself to ensure that there were funds in place to satisfy any judgment against the husband. Part of the pool of assets of the husband was lost between December 2001 and May 2002.
On 28 February 2007 proceedings in the Family Court were commenced by the wife (“the Family Court proceedings”). She sought orders that the property at A be transferred to her. The consequence of this order, if made, would have been to render any civil judgment of Mrs Woodley against the husband valueless. In fairness to the wife, she disclosed the Family Court proceedings to Mrs Woodley. The proceedings in the Family Court were listed for mention on the 28 February 2007 and were then adjourned for a case assessment conference on the 12 April 2007.
Mrs Woodley, in order to protect the interests of herself and her children in relation to the civil proceedings, intervened in the Family Court proceedings. She filed an address for service and attended a case assessment conference on the 12 April 2007. No agreement was reached at the case assessment conference, although a valuation of the property at A was ordered.
Mrs Woodley filed a response to the Family Court proceedings in April 2007. The husband filed his response to those proceedings on the 24 April 2007. In that response he consented to an order that he transfer his interest in the property at A to the wife. I do not make a specific finding in this regard, however, it may be that such a response could have constituted a contravention by the husband of the Mareva Injunction.
The effect of that consent by the husband would, if implemented, have reduced the asset pool of the husband to a level where there would be no assets available to meet any damages awarded against him in the civil proceedings for the benefit of Mrs Woodley and her children.
In May 2007 the civil proceedings were settled by way of an agreed judgment in favour of Mrs Woodley and her children against the husband.
The judgment has been satisfied by way of borrowings by the husband secured against his and the wife’s interests in the property at A.
In June 2007 the wife’s solicitor advised Mrs Woodley’s solicitors that the wife wished to discontinue the Family Court proceedings.
On the 8 February 2008 Mrs Woodley filed an affidavit and the facts in that affidavit are not in issue except as to the extent of her income. Counsel for the wife submitted that the only issue was whether Mrs Woodley’s income would be slightly larger than $41,000.00 per annum. I accept that it is likely that her income is slightly larger than that $41,000.00.
On the 19 February 2008 the wife filed an affidavit and the facts in that affidavit are not in issue.
Mrs Woodley seeks a costs order against the wife and not against the husband.
Mrs Woodley is aged 50 and she has the care of her two children who I referred to earlier in these reasons. Mrs Woodley is employed and in various ways earns an income of slightly more than $41,000.00 per year. That income is made up from pension, superannuation and some Government benefits.
The elder child pays $50.00 a week board. Mrs Woodley owns her home which is subject to a mortgage of $4,500.00 and she has a motor vehicle with a value of about $25,000.00.
The wife is employed. As stated earlier in these reasons, she is aged 40 and has the care of her 7 year old son, who is wholly dependent on her. The wife has retained the property at A and says that she purchased a half share in that property by virtue of the payment to the husband which was used to pay the settlement of the civil proceedings. The consequence of that settlement is that the mortgage debt on the property at A is about $150,000.00. The wife says she has purchased the husband’s share in the property although she does not seek the transfer of this interest in that property to her pursuant to the Family Court proceedings (they are discontinued) nor has she transferred the legal title of that property to her name.
The question of costs is governed by s117 of the Family Law Act 1975 (the “Act”) which provides:-
(1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) 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 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 the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings 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.
(3)To avoid doubt, in proceedings in which an independent children's lawyer for a child has been appointed, the court may make an order under subsection (2) as to costs or security for costs, whether by way of interlocutory order or otherwise, to the effect that each party to the proceedings bears, in such proportion as the court considers just, the costs of the independent children's lawyer in respect of the proceedings.
(4)However, in proceedings in which an independent children's lawyer for a child has been appointed, if:
(a)a party to the proceedings has received legal aid in respect of the proceedings; or
(b)the court considers that a party to the proceedings would suffer financial hardship if the party had to bear a proportion of the costs of the independent children's lawyer;
the court must not make an order under subsection (2) against that party in relation to the costs of the independent children's lawyer.
(5) In considering what order (if any) should be made under subsection (2) in proceedings in which an independent children's lawyer has been appointed, the court must disregard the fact that the independent children's lawyer is funded under a legal aid scheme or service established under a Commonwealth, State or Territory law or approved by the Attorney‑General.
THE RELEVANT LEGAL PRINCIPLES
The general rule in relation to s117(1) of the Act is that each party to the proceedings shall bear his or her own costs of the proceedings, subject to s117(2), s117AA and s118. If I am of the view that there are circumstances that justify me in doing so, I may make such order as to costs, whether by way of interlocutory order or otherwise, as I consider just. Section 117 of the Act requires me not only to consider that the order for costs be just but also that in the particular circumstances of the case, that there are circumstances that justify the making of the order. Section 117(2A) sets out the matters which I shall have regard to in determining what order if any is to be made under s117(2).
In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:
“The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.''
In the absence of their being circumstances that justify the court making an order for costs, then s117(1) provides that each party will bear his or her own costs of the proceedings under the act.
The interpretation to be applied to s117 and the inter relationship of s117(1) and s117(2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800. In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:
“It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.”
“Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case’” .
“Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.”
“Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19…(which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest...” (at 75,054).
“Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”
The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs[2].
[2] Jensen and Jensen (1982) FLC 91-263.
By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”. I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL (2005) FamCA 118 the Full Court held at paragraph 41:
“…Nowhere in subsection 2(A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”
In the matter of I and I (No 2) FLC 92-625, the Full Court at p 82,277 said:
“that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs.”
In this case Nicholson CJ, Ellis and Baker JJ declined to follow the the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case his Mushin J had said at p 81,271;
``In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order were made.''
The Full Court in I and I (No 2) above, declined to follow this approach and held at p 82,277;
“With respect... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.''
Having regard to the factual matters set out above, I find that this is a matter where there are circumstances such as to justify the making of an order for costs. That being the case I have a broad discretion in relation to the making of costs orders.
RELEVANT FACTORS
I am required to consider the matters under s117(2A) to determine whether there is justification for me to make an order for costs and in doing so I need to examine the evidence presented by the parties.
(a) the financial circumstances of each of the parties to the proceedings
The Full Court in Kelly and Kelly (No 2) (1981) FLC 91-108 and Jensen and Jensen (supra) said that a disparity in the financial resources between the parties may justify and order for costs in favour of the party with fewer financial resources. The Full Court affirmed this approach in the decision of Marinko and Marinko (1983) FLC 91-307. In this case, the Full Court said at p 77,366:
``[The trial Judge] referred, properly in our view, to Kelly and Kelly (No 2) (1981) FLC ¶91-108... in support of the view that the disparity in financial circumstances between the parties is a matter which, alone, can justify an order for costs.''
Mrs Woodley is employed and earns an income of $41,000.00 per annum which could be somewhat slightly larger. That income is made up of pension, superannuation and some government benefits. The wife is employed and earns approximately $52,000.00 per annum. I find that both the wife and Mrs Woodley have similar incomes and their assets are relatively similar. The wife has a significant mortgage of $150,000.00 as against a very modest mortgage of Mrs Woodley of about $4,500.00. The wife has the care of a 7 year old child; Mrs Woodley has the care of her children.
When I consider the financial circumstances of these parties at the time of the application there is a disparity in financial resources between them, by reason of the substantial mortgage debt against the property at A. The impact of different financial circumstances between the parties ought not to be a major consideration in circumstances such as this where a third party needed to intervene in the proceedings to protect property belonging to that third party.
A different approach should be adopted as in relation to proceedings between parties to a marriage or a relationship than third parties who properly intervene, or for that matter the liability for costs payable by third parties who do not properly intervene.
(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;
Neither party are in receipt of legal aid.
(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;
The principle that the conduct of the parties should be relevant to the question of costs was given legislative recognition in the Act.Since November 1983, I am required, in accordance with s 117(2A), to have regard to the conduct of the parties in relation to the proceedings including the parties conduct in relation to pleadings, particulars, discovery, inspection, directions to answers, admission of facts, the production of documents and similar matters[3].
[3] Broun & Fowler Volume 2 CCH “Australian Family Law and Practice” at page 61-150.
If a party discontinues proceedings then another party may apply for costs.
In this matter the Family Court proceedings were commenced by the wife and in circumstances where there was the Mareva Injunction preserving the assets of the husband in terms of the civil proceedings between himself and Mrs Woodley. Mrs Woodley had little alternative but to become party to the Family Law proceedings.
This must be seen in the light that the husband filed a response consenting to the orders of the wife. Subsequent to that time when the Supreme Court judgment was satisfied the wife, in June 2007, chose to discontinue the Family Court proceedings and there appears to be no matrimonial issues now to be determined between the husband and the wife notwithstanding that they still have joint legal title to the property at A.
Counsel for the wife submitted that the proceedings were necessary by her to preserve the assets against a claim by Mrs Woodley. I reject this submission, as there were no civil proceedings by Mrs Woodley against the wife.
There was no challenge to the assets of the wife by Mrs Woodley in the civil proceedings; the claim was against the husband and impacted upon his one half share of the property at A.
On the facts before me I find that the primary reason the Family Court proceedings were commenced was in an effort to preserve or protect the husband’s one half share in the property at A as against the claim by Mrs Woodley.
In coming to this finding I take into account the history of the civil proceedings as set out earlier in these reasons and the wife’s subsequent discontinuance of her application in the Family Court proceedings in June 2007, which was in the absence of any evidence of a financial agreement under the Family Law Act or any other settlement between the husband and the wife apart from the wife’s assertion that she has purchased the husband’s equitable interest in the property at A.
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
This is not a relevant consideration in these proceedings.
(e) whether the parties to the proceedings have been wholly unsuccessful in the proceedings
It was argued on behalf of Mrs Woodley that the wife was wholly unsuccessful in the Family court proceedings. The property proceedings between the husband and the wife have not been adjudicated or settled and as such I do not make that finding pursuant to that submission. It is of concern that the proceedings were commenced by the wife prior to the settlement of the civil proceedings and were discontinued by her after the settlement of the civil proceedings and in circumstances where no order was made between the wife and the husband in regard to assignment of the property at A. There is no evidence before me of a financial agreement under the Family Law Act and the legal title of the property at A remains in the joint names of the husband and the wife. From those facts I infer that the proceedings were not primarily initiated to adjust property between parties to a marriage but were primarily initiated in response to the civil 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
There is no admissible evidence before me of any offers in relation to the question of costs.
(g) such other matters as the court considers relevant.
The law (in relation to the question of third party costs) in this regard is was discussed by the High Court in Re JJT & Ors; ex parte Victoria Legal Aid (1998) FLC 92-812 at p 85,183 per Gummow J when he said;
“para (g) speaks of such other matters as the court considers relevant. The result is to accommodate within s 117 orders as to the carriage of costs by third persons with an interest in the litigation of the nature identified by Mason CJ and Deane J, and Gaudron J, in Knight v FP Special Assets Ltd [(1992) 174 CLR 178 at 192-3, 205]."
A third party intervening in or being joined to Family Law property proceedings is generally drawn into such litigation maintain, protect or assert some proprietary property right. They are generally strangers to the marriage or relationship. To become involved in such litigation almost inevitably imposes substantial cost on the intervenor and adds to the costs of the paries to the marriage. Considerable weight needs to be given to the reasons for a third party to intervene. The bona fides of such intervention should be considered, including any question/s as to whether the intervention is based upon substantial grounds or is driven by tactical factors.
The Court should be robust in exercising its discretion to make a costs order in favour of a third party where there is substantial basis for the third party intervention. Conversely, if the intervention by a third party is tactical and/or disingenuous a Court should be equally robust in exercising its discretion to make costs orders against third parties.
I have taken into consideration the fact that Mrs Woodley had a substantial interest to protect and that had little alternative but to intervene in the Family Court proceedings. Mrs Woodley was a third party with an genuine interest in the outcome of the Family law litigation as if she had not intervened there existed a genuine risk that the husband could have transferred his interest in the property at A to the wife by way of an order or other property settlement. The effect of such an order could, if implemented, have reduced the asset pool of the husband to a level where he would not be able to satisfy any judgement in the civil proceedings, which proceedings were well based.
Having had regard to all of the facts and circumstances in this matter and applying them to the law, it seems appropriate to make a costs order requiring the wife to meet the party/party costs incurred by Mrs Woodley in these proceedings, such costs to include the costs of the application in a case.
I certify that the preceding 60 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin
Legal Associate:
Date: 14 March 2008.
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