Yusuf & Yusuf
[2022] FedCFamC1F 680
Federal Circuit and Family Court of Australia
(DIVISION 1)
Yusuf & Yusuf [2022] FedCFamC1F 680
File number(s): PAC 3522 of 2017 Judgment of: HANNAM J Date of judgment: 8 September 2022 Catchwords: FAMILY LAW – COSTS – Leave to file application out of time – Costs sought by wife in relation to substantive property proceedings and associated stay proceedings – Where a loan agreement purported by the husband found to be a sham – Costs awarded to the wife as agreed or assessed Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.13, 15.06
Cases cited: Yusuf & Yusuf [2021] FamCA 116
Yusuf & Yusuf (No. 2) [2021] FamCA 513
D & D (Costs) (No.2) (2010) FLC 93-435
Gallo v Dawson (1990) 93 ALR 479
Penfold v Penfold (1980) 144 CLR 311
Division: Division 1 First Instance Number of paragraphs: 50 Date of last submission/s: 18 March 2022 Place: Parramatta Counsel for the Applicant: Ms Dart Solicitor for the Applicant: Sanford Legal Solicitor for the Respondent: Litigant in person (did not participate) ORDERS
PAC 3522 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS YUSUF
Applicant
AND: MR YUSUF
Respondent
order made by:
HANNAM J
DATE OF ORDER:
8 September 2022
THE COURT ORDERS THAT:
1.Leave is granted to the wife to bring her application for costs in relation to the substantive property proceedings out of time.
2.The husband pay the wife’s costs as agreed or assessed in respect of the substantive property proceedings commenced on 28 July 2018 and finally determined by his Honour Justice Foster on 12 March 2021.
3.The husband pay the wife’s costs as agreed or assessed in respect of the stay proceedings commenced by the husband and determined by Justice Foster on 16 July 2021.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 pseudonym Yusuf & Yusuf has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HANNAM J:
INTRODUCTION
This judgment concerns an application for costs made on behalf of an applicant wife in relation to property proceedings which were finalised some time ago.
In her Application in a Proceeding filed 3 November 2021, the wife seeks and order that the husband pay her costs in relation to property settlement proceedings which were commenced in 2018 and determined following final hearing in March 2021. She also seeks costs in relation to the husband’s application to stay the March 2021 final orders pending determination of an appeal that he also instituted. As the time to file an application for costs in relation to the substantive proceedings has lapsed, the wife also seeks an order that she be granted leave to bring her application for costs out of time.
This application came before me in December 2021 when orders were made for the husband to file a Response to the wife’s Application in a Proceeding by 17 January 2022. At the next court event in March 2022, the husband had still not filed any material in response to the wife’s application and also failed to appear. In those circumstances, the wife made an application that her costs application be dealt with on an undefended basis against the husband. As I was satisfied that the husband was aware of the court event and of his requirement to file material as ordered, orders were made for the application to be dealt with in that way, in chambers upon receipt of written submissions provided only by the wife.
On 17 August 2022 an order was made in chambers providing the husband with an opportunity to file any written submissions upon which he wished to rely in response to the wife’s application for costs within 14 days. No written submissions were filed by the husband.
The question for me now to determine is whether there are circumstances that justify departing from the usual Rule that each party shall bear his or her own costs.
background
The parties (“the wife” and “the husband”) were married in 1993 and separated in 2016. They were divorced in March 2018.
In July 2018 the wife commenced parenting and property proceedings in the Family Court (as it was then known). At the time of filing her application, four of the parties’ children were under the age of 18 and the main asset available for distribution was the parties’ former matrimonial home at Suburb C (“the Suburb C property”), which had been converted into duplexes by the husband in 2010.
On 18 December 2018, the husband’s nephew was joined to the proceedings as second respondent (“the second respondent”). At that time both the husband and the second respondent contended that the second respondent held an equitable interest in the Suburb C property as he had provided a loan to the husband to fund the development of that property.
In May 2020 the parenting dispute was resolved by way of orders made with the consent of the parties.
The property proceedings were heard on a final basis by Foster J over four days in September and December 2020. A central issue at trial was the question of asserted funds advanced by the second respondent to the husband to construct the Suburb C property. Final orders (“the March 2021 orders”) and Reasons for judgment were delivered in March 2021. In those Reasons, the trial judge found that the loan arrangement contended for by the husband and second respondent was a sham.[1]
[1] Yusuf & Yusuf (No. 2) [2021] FamCA 513 at [2].
On 8 April 2021 the husband filed a Notice of Appeal against the March 2021 orders in the Full Court.
On 29 April 2021 the husband filed an Application in a Case (as it was then called) seeking an unconditional stay of the March 2021 orders pending determination of his appeal. The wife opposed the husband’s application for such a stay. On 16 July 2021 orders were made that the March 2021 orders be stayed pending determination of the appeal on the condition that the husband pay to the wife the sum of $50,000 within two months. The husband did not make the required payment to the wife and consequently the stay lapsed.
In August 2021 the trial judge retired.
On 12 October 2021 the husband filed a Notice of Discontinuance with respect to the appeal.
On 3 November 2021 the wife filed an Application in a Proceeding seeking that the husband pay her costs as agreed or assessed in respect of the substantive property proceedings and in respect of the stay proceedings and that leave be granted to commence the costs application out of time. The wife also sought an order which appeared to be in the nature of enforcement.
As the trial judge had retired following final determination of the dispute, the application for costs was listed before me on 22 December 2021. At that court event the applicant wife clarified that costs were sought against the husband only and the second respondent was discharged as a party to the proceedings. The husband, who was represented by counsel at that court event, was ordered to file a Response to the Application in a Proceeding by 17 January 2022. The wife was also directed that if she sought an order in the nature of enforcement, such application should be made in accordance with the relevant rules.
On 2 February 2022 the husband’s solicitor filed a Notice of Ceasing to Act.
The wife’s application came before me again by way of video link on 11 March 2022 at the request of her solicitor noting that the husband had not filed his Response as ordered and was now self-represented. The husband failed to appear at the court event even though, as noted at the time, he had been sent the link to join the court event via email and had initially made contact with the Court but thereafter left the court event. Two further emails were sent by the Court and numerous phone calls were made to the husband to which he did not respond. In those circumstances, the wife made an application that the proceedings be dealt with undefended as against the husband and orders were made to that effect.
For the purposes of this application the Judgments of Foster J of 12 March 2021[2] and of 16 July 2021[3] were marked as exhibits in the proceedings. The wife was also provided with an opportunity to provide written submissions directly to chambers and judgment was reserved upon receipt of those written submissions.
[2] Yusuf & Yusuf [2021] FamCA 116 (“Yusuf & Yusuf”).
[3] Yusuf & Yusuf (No. 2) [2021] FamCA 513.
On 17 August 2022 an order was made in chambers providing the husband with an opportunity to file any written submissions upon which he sought to rely in response to the wife’s application for costs directly to chambers within 14 days. The husband was notified of this order by email (which he had previously used to contact the court) but no submissions were filed.
the law & discussion
Leave to apply out of time
Rule 12.13 (3)(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) provides that an application for costs may be made by filing an Application in a Proceeding within 28 days after the final order is made.
The wife seeks leave pursuant to Rule 15.06 to file her application for costs in relation to the substantive property proceedings out of time as the 28 day period provided for in the Rules has lapsed. Rule 15.06 relevantly provides:
15.06 Shortening or extension of time
(1) The Court may at any time, on the application of a party or the court’s own initiative, shorten or extend a time that is fixed under these Rules or by a procedural order.
(2) A party may apply under subrule (1) for an order extending a time even though the time fixed by the rule of procedural order has passed.
(3) A party who makes an application under subrule (1) for an extension of time may be ordered to pay any other party’s costs in relation to the application.
It is submitted on behalf of the wife that that the High Court decision of Gallo v Dawson[4] is the relevant authority in relation to the exercise of the discretionary power to extend time. She relied in particular on the following statement of McHugh J at 480:
... The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time...
[4] (1990) 93 ALR 479.
The wife provides the following reasons to explain her delay in filing an application for costs in relation to the final property proceedings:
(a)The parties engaged in further negotiations after delivery of judgment;
(b)It was appropriate for the husband’s appeal to the Full Court to be completed before a costs application in relation to the property proceedings (being the proceedings which were the subject of the appeal) could be determined;
(c)The wife gave birth in 2021 (approximately four weeks following final orders being delivered) which made it difficult for her to attend upon her solicitor to provide instructions in relation to a costs application at this time;
(d)General complications arising from restrictions associated with the Covid-19 pandemic which were in place at that time.
It is submitted on behalf of the wife that strict compliance with the Rules which require an application for costs to be made within 28 days would render an injustice on her. In particular, the wife submits that it was not unreasonable for her to believe that an application for costs would not be dealt with until the appeal had been determined. While it is the usual practice for a costs application for substantive proceedings to be determined after the finalisation of the appeal proceedings, I do not accept that this usual practice precludes an applicant from filing an application for costs in the usual time frame provided for in the Rules. If the wife had filed an application within the prescribed timeframe, that application could have simply been adjourned pending the determination of the appeal.
Notwithstanding the above, I accept that strict compliance with the Rules in relation to time would render an injustice to the wife. In support of her application for leave to apply out of time, the wife points to the conduct of the husband in the proceedings and appropriately submits that it is likely that she will be successful in obtaining an order for costs if leave is granted. For reasons which will follow, I place significant weight on this submission and find that the Rules will work an injustice upon the applicant if an extension of time to make an application for costs is not granted.
The wife correctly submits that leave is not needed in relation to costs for the stay application as an order was made on 16 July 2021 that the costs of that application for stay be reserved pending determination of the appeal.
Application for costs
The applicant is seeking that her costs of and incidental to the final property proceedings and the application for stay be paid by the respondent husband as agreed or assessed.
Applications for costs in this Court are the exception to the rule. Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) sets out the general rule as being that each party is to bear his or her own costs. That principle is, however, subject to subsection (2) which gives a court a discretion to make an order for costs if there are circumstances that it in the opinion justify it in doing so. Any such order for costs is to be pursuant to section 117(2) “as the court considers just”.
The High Court in Penfold v Penfold[5] indicated that the circumstances justifying an order for costs need not be exceptional, but they must, of themselves, be sufficient to justify the making of an order for costs. Therefore, there is no additional or special onus on an applicant seeking an order for costs other than the Court finding justifiable circumstances to make such an order.
[5] (1980) 144 CLR 311.
Section 117(2A) sets out the relevant matters, if any are applicable, to which the Court is to have regard in considering an order for costs. The matters relevant in this case are considered below.
The financial position of each of the parties to the proceedings
In the substantive property proceedings, the property pool available for distribution consisted of the Suburb C property (valued at $1.3 million), the husband’s car (valued at $3,000) and two bank accounts held by each of the parties separately (containing $5,503 and $10 respectively).
Final orders made on 12 March 2021 provided that the Suburb C property be sold and the net proceeds of sale be distributed with 40% going to the wife, in payment of any arrears of council or water rates and the balance then remaining to the husband. Annexed to an affidavit filed on behalf of the wife in support of her costs application is the contract for the sale and purchase of the Suburb C property and a settlement breakdown from that sale. According to those documents, the Suburb C property was sold in late 2021 and from the proceeds the wife received $681,878 and the husband received $1,008,490. The husband, together with one of his daughters, were the purchasers of the property.
The wife submits that she is otherwise dependent on Centrelink benefits and suffers from certain health conditions that prevent her from obtaining meaningful employment.[6] The wife has no employment history, having married at 18 years of age and thereafter being primarily engaged in household duties including caring for the parties’ children.[7] The wife has re-partnered and is the primary carer of her infant child.
[6] Yusuf & Yusuf at [50].
[7] Yusuf & Yusuf [10] and [83].
The husband’s financial position can be gleaned from the Reasons[8] of Foster J at [51]:
The husband is 53 years of age, and says, he is solely reliant upon his Centrelink parenting payment of about $982 per week. He has three adult children residing in the household who are in receipt of income. He remains residing in the former matrimonial duplex property and has about $5,000 in savings. He asserts ill health arising from diabetes, hypertension and arthritis and he had a stent inserted in 2014. Yet in his oral evidence he asserts that he could get a job in the future and it was his wish to obtain employment. He says he wishes to retain the [Suburb C] property that comprises in all eight bedrooms for himself and the children but concedes that it may need to be sold.
[8] Yusuf & Yusuf.
It is submitted on behalf of the wife that the husband’s financial circumstances are uncertain and she points to the finding of Foster J at [26]:
…The absence of objective evidence adduced by the husband to assist in the proof of his assertions as to financial dealing and transactions solely within his knowledge and control was alarming…
Despite the uncertainty of the husband’s financial circumstances, as he (together with one of his daughters) purchased the Suburb C property the husband must have access to some financial resources.
Whether any party to the proceedings is in receipt of assistance by way of legal aid
Neither party was in receipt of legal aid.
The conduct of the parties to the proceedings in relation to the proceedings
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
It is submitted on behalf of the wife that the husband’s decision to pursue a case that he owed a debt of $1,125,000 to the second respondent resulted in protracted proceedings between the parties and the wife incurring unnecessary legal costs in defending that claim.
In particular, the wife points to the following relevant findings of Foster J:
[45]…Curiously, all of the payments were made in cash not only to purchase materials and pay subcontractors, but payments received by the husband from the second respondent... Curiously it was not until after the wife commenced proceedings in July 2018 that a “loan agreement” dated 20 February 2010 was produced by the husband…The husband acknowledges that he never spoke to the wife in relation to this asserted “financial relationship” with the second respondent.
…
[77] The evidence of the husband and the second respondent in relation to the “loan agreement” relating to monies allegedly advanced for the purposes of the duplex construction is remarkable. The wife had no knowledge of any such arrangement or any documents relating thereto until these current proceedings. Not one record of any financial transaction save for self-serving notes…
[78] The evidence of the husband and the second respondent in relation to the asserted loan arrangement is to be treated with great circumspection. They assert the “loan agreement” and the transactions evidencing same. They bear the evidentiary onus of proving that assertion on the balance of probabilities. Yet not one piece of objective evidence is produced to support their contentions.
[79] On balance the Court is satisfied that the “loan arrangement” asserted by the husband and the second respondent is a sham. The Court is unable to determine on balance whether, indeed, any funds were advanced by the second respondent as asserted and in such circumstances the alleged debt to the second respondent unilaterally asserted by the husband is not established and will not be included in the asset pool.
It is clear from the forgoing findings of Foster J that the husband’s contention that the second respondent held an equitable interest in the Suburb C property was doomed to fail. As stated in the judgment, it is the husband and the second respondent who held the evidentiary onus to establish this interest yet not one piece of objective evidence was provided by either of them.[9] In these circumstances, the husband and second respondent ought to have known that their application could not succeed and I accept the submission made on behalf of the wife that the husband’s conduct in pursuing this case is a factor which weighs heavily in favour of a costs order being made against him.
[9] Yusuf & Yusuf at [78].
Further, the husband sought in his application that the wife receive a property adjustment of only $25,000. The husband was also wholly unsuccessful with this aspect of his application.
In relation to the stay proceedings, it is submitted on behalf of the wife that while the husband was successful in obtaining a stay he did not comply with the preconditions of that order and as a result the stay lapsed. The wife also observes that the husband did not pursue his appeal with respect to which the stay was granted. It is submitted on behalf of the wife that an inference can be drawn that the husband pursued the appeal and associated stay for the purpose of delaying the implementation of the orders and in those circumstances, it is proper and appropriate that he pay the wife’s costs relating to the stay proceedings.
I accept the submission made on behalf of the wife and have no difficulty drawing the inference that she seeks. Relevantly, it has already been accepted that the husband does have access to financial resources, evidenced by his ability to purchase the Suburb C property. It can thus be accepted that the husband did have the ability to meet the condition of the stay, being the requirement to pay a sum to the wife, if he genuinely sought to pursue his appeal.
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The proceedings were not necessitated by a failure of a party to comply with orders of the Court. However, it is observed by the wife that the husband did not comply with the conditions upon which the stay was granted.
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
The wife deposes that each of the parties made one offer of settlement in the proceedings.
The husband and the second respondent made an offer of settlement in writing to the wife on 5 July 2019 in which they offered that she receive the sum of $125,000 and the husband retain the Suburb C property. The wife rejected the husband’s offer and on 15 July 2019 counter offered that the husband pay a sum of $46,000 to discharge her debt to Centrelink and that he further pay to her a sum of $450,000 in exchange for the husband retaining the Suburb C property. The wife’s counteroffer was rejected by the husband.
Orders made following final hearing provided that the Suburb C property be sold with a reserve price of $1,300,00 and that following payment of sales costs, the wife receive 40% of the net proceeds of sale. It is submitted on behalf of the wife that if the property were to have sold at the reserve price, she would have received $520,000 (less sales costs). It is submitted on her behalf that the outcome received by the wife at trial was substantially better than that which she would have received had the husband accepted the offer made by her on 15 July 2019 and that this is a factor that should substantially weigh in favour of costs being ordered.
I accept the submission of the wife that this is a factor that favours a cost order being made against the husband. The husband had the opportunity to finalise the proceedings nearly two years prior to final property orders being made in March 2021. Had the husband taken this opportunity, the parties would not have incurred further unnecessary legal fees, including fees associated with a four day final hearing, and the husband should have known at that stage that his contention that the second respondent held an equitable interest in the Suburb C property was not likely to succeed. It is also noted that the husband’s offer of settlement was significantly less than the outcome received by the wife and could not be seen to be a genuine offer to settle the proceedings.
Conclusion
Balancing the relevant matters that I have set out and giving particular weight to the husband’s decision to pursue a case which had no evidentiary basis and was thus doomed to fail, and his decision to not comply with the conditions of the stay or to pursue his appeal, I am satisfied that a costs orders should be made against him as sought by the wife and as set out at the forefront of this judgment.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hannam. Associate:
Dated: 8 September 2022
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