ZUBCIC & ZUBCIC
[2020] FamCA 153
•13 March 2020
FAMILY COURT OF AUSTRALIA
| ZUBCIC & ZUBCIC | [2020] FamCA 153 |
| FAMILY LAW – COSTS – Where both the applicant’s and respondent’s conduct at first instance exacerbated the costs of proceedings – Where both are to bear their own costs – Where the applicant was wholly unsuccessful in her opposition to the second respondent’s claim – Where the claim was supported by compelling evidence – Order for the applicant to pay indemnity costs to the second respondent. |
| Family Law Act 1975 (Cth) s 117(2A) |
| Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 Hand & Bodilly [2013] FamCAFC 98. Prantage & Prantage (2013) FLC 93-544 Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 |
| APPLICANT: | Ms Zubcic |
| RESPONDENT: | Mr Zubcic |
| SECOND RESPONDENT: | Mr B Zubcic |
| FILE NUMBER: | SYC | 6290 | of | 2013 |
| DATE DELIVERED: | 13 March 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 27 February 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Connor |
| THE RESPONDENT: | In person |
| SOLICITOR FOR THE SECOND RESPONDENT: | YFX Lawyers |
Orders
IT IS ORDERED
That the wife’s application seeking an order that the husband pay her costs is dismissed.
That the husband’s application seeking an order that the wife pay his costs is dismissed.
That the wife pay the costs of the second respondent on an indemnity basis, in the sum of $83,936.25.
That from any funds to be paid to the wife pursuant to Order 3 (9.5) made on 9 October 2019, the sum of $83,936.25, together with interest at the rate prescribed by the Family Law Rules from the date of these orders until the date of payment, be paid to the second respondent.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zubcic & Zubcic has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6290 of 2013
| Ms Zubcic |
Applicant
And
| Mr Zubcic |
Respondent
And
Mr B Zubcic
Second Respondent
REASONS FOR JUDGMENT
On 6 March 2018, reasons were delivered and orders made in proceedings relating to financial matters between Ms Zubcic (“the wife”), Mr Zubcic (“the husband”), Mr B Zubcic (“the second respondent” who is the husband’s father), Mr Gomes and Ms Gomes (“the third and fourth respondents” who are the wife’s parents), the Commissioner of Taxation (“ATO”) and a firm of solicitors who were owed money by the husband.
The final hearing took place over nine days commencing on 20 November 2017 and ending on 6 December 2017.
In order to give some understanding of the complexity of the litigation, I set out the competing applications as they were detailed in the substantive judgment:
64. The wife sought:
·the sale of B Street;
·payment of the whole of the net proceeds of sale of B Street to her;
·payment of the whole of the controlled monies account to her;
·payment of the proceeds of sale of Suburb L to her;
·payment of any funds held by the husband’s former solicitors, XY Lawyers, to her;
·addback of the entire taxation debt of the parties against the husband with the effect that he would be solely responsible for the amount of tax paid by them both, a total of $2,256,536;
·spousal maintenance, backdated to 3 February 2014, in the sum of $1,500 per week in perpetuity;
·lump sum adult child maintenance for Mr G in the sum of $769,080 or, in the alternate, adult child maintenance for Mr G in the sum of $1,479 per week (indexed).
65.The wife’s application would have the effect, if successful, that she would receive net assets of some $6,367,000. The husband would receive nothing and be left with a liability for the tax of $2,256,536 and for adult maintenance of $769,080, a net liability of $3,025,616 together with a liability to pay spousal maintenance.
66.The wife’s case needs only to be stated for its flaws to be exposed.
67.In her application, the wife sought a declaration that the partnership between her and the husband either never existed or, in the alternate, was dissolved in 2001 or, in the alternate, was dissolved not later than 1 August 2013. At the commencement of the hearing, Counsel for the wife indicated that this application was abandoned. However, her application for an order that the husband bear the whole of the tax liabilities of the partnership appears to be based on that contention.
68.She also, implicitly, seeks to have the application of the second respondent dismissed.
69.The husband seeks:
·payment of the proceeds of sale of Suburb L to the second respondent;
·payment from the controlled monies account of all amounts outstanding in relation to B Street; $15,000 to him; payment of all money owed to the Commissioner; payment of various debts of the parties and the business and an equal division of the remainder;
·allocation of various liabilities to him and other liabilities to the wife;
·transfer of B Street to him upon payment to the wife of $1,400,000;
·in default of the transfer of B Street, the appointment of a trustee for sale other than the wife.
70.The second respondent, at the commencement of the proceedings, sought:
·payment to him of the proceeds of sale of Suburb L;
·indemnity costs as against the wife.
71.As will be seen from these reasons, the position of the second respondent changed at the conclusion of the evidence. He then sought the equivalent of 12.5 per cent of the net proceeds of sale of H Street.
72.The Commissioner sought payment of all outstanding amounts owed by way of tax and penalties.
73.XY Lawyers sought payment of outstanding costs which they have quantified in a document. The amount outstanding at 1 March 2018, the date of delivery of judgment, is $29,905.67.
74.Mr and Ms Gomes sought an order that the husband be solely responsible for the payment of the costs of the purchaser of H Street incurred in the Supreme Court proceedings.
The wife appealed the orders made on 6 March 2018. Judgment in the appeal was delivered on 9 October 2019.
The applications now before the Court relate to the costs of the substantive hearing at first instance.
The wife, the husband and the second respondent each seek costs. They each asked to make oral submissions. Those oral submissions were heard on 27 February 2020. In addition to written submissions, the wife filed an affidavit with 555 pages of annexures. The husband filed two affidavits and a Case Outline document. The second respondent relied on an affidavit by his solicitor and a Case Outline document.
THE COMPETING APPLICATIONS FOR COSTS
By an Application in a Case filed on 5 April 2018 the wife seeks orders to the following effect:
1. That the husband pay her costs on an indemnity basis incurred between 29 May 2014 and 25 September 2017 (excepting the costs “associated with the Order made on 1 March 2018”).
2. That the second respondent pay her costs on an indemnity basis incurred between 29 May 2014 and 25 September 2017 (excepting the costs “associated with the Order made on 1 March 2018”).
3. In the alternate to 1. and 2. that the husband and the second respondent pay those costs on a party and party basis.
The wife then seeks similar orders against the husband and the second respondent in relation to her costs incurred between 25 September 2017 and 6 March 2018 (again excepting the costs “associated with the Order made on 1 March 2018”). That is, that those costs be paid on an indemnity basis, or, in the alternate, on a party and party basis.
How those costs, if ordered, should be apportioned between the husband and the second respondent is not specified.
The husband seeks an order that the wife pay his costs incurred between 28 May 2014 and 6 March 2018 on an indemnity basis in relation to specified periods or, in the alternate, on a party and party basis.
Again in the alternate, he seeks orders that the wife pay his costs incurred after 25 September 2017 in relation to specific issues, namely:
1.The wife’s assertion that the second respondent had no interest in the property of the parties.
2.The wife’s assertion that she was not a partner in the business.
3.The wife’s assertion that the husband should bear all of the outstanding taxation liabilities arising from the operation of the business.
4.The consent orders entered into between the husband, the wife and the ATO.
5.The wife’ assertion that the husband disposed of assets of the business.
6.The wife’s assertion that the husband committed waste by gambling.
7.The wife’s waste as trustee for sale of the B Street property.
8.The wife’s assertion that the husband perpetrated family violence and the Kennon case.
The second respondent seeks orders that the wife pay his costs of the proceedings on an indemnity basis or, in the alternate, on a party and party basis.
All of the competing applications fall to be determined in accordance with the provisions of s117(2)(A) of the Family Law Act 1975 (Cth) (“the Act”) which is set out below:
(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
In the event that it is determined that it is appropriate to make an order for one party to pay all or part of the costs of another party, there must then be a consideration of whether those costs should be paid on a party and party basis or on an indemnity basis.
INDEMNITY COSTS
The Full Court has most recently considered the law in relation to indemnity costs in Prantage & Prantage (2013) FLC 93-544 (“Prantage”). The majority (Thackray and Ryan JJ) set out the principles to be applied, holding that the principles enunciated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 (“Colgate-Palmolive v Cussons”) should continue to be applied in the Family Court of Australia. The principles (as summarised by Cooper and Merkel JJ in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 156-157) were reproduced in Prantage at [82]:
82. …
1.Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2.In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c) whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
In Hand & Bodilly [2013] FamCAFC 98 (“Hand & Bodilly”) the Full Court (per Faulks DCJ, Ryan and Watts JJ) considered the appropriateness of an order for indemnity costs, where party/party costs or solicitor/client costs could be ordered. Rule 19.18 of the Rules provides that:
(1)The court may order that a party is entitled to costs:
(a) of a specific amount;
(b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
…
In Hand & Bodilly, the difference between party/party costs and solicitor/client costs was accepted to be:
91.…
… that on a taxation between parties on a solicitor and client basis, the unsuccessful party has to pay all the costs incurred by his opponent excepting in respect of (1) costs and expenses incurred prior to the institution of the action; (2) journeys and expenses of which the party liable could have no knowledge, and which would not ordinarily be performed or incurred; (3) the employment of more counsel, or the payment to them of larger fees than the circumstances of the case warrant, including the giving of special retainers.
Their Honours went on to compare solicitor/client costs with indemnity costs in the following manner:
102.… Sometimes that discussion equates “solicitor and client” costs with “indemnity” costs but as Santow JA said in Bouras v Grandelis (2005) 65 NSWLR 214:
125. The weight of authority is that solicitor and client costs and indemnity costs are distinct, though the difference between them has been eroded by practice and by inconsistent amendments to the various legislative instruments that make up the costs assessment regime.
126. An order for solicitor and client costs will allow all reasonable costs or all costs as fair justice to the other party will allow. The onus of proving that the costs are reasonable falls on the receiving party.
127. Historically, solicitor and client costs were somewhat more generous than party/party costs. …
It follows that the distinction between indemnity costs and solicitor/client costs, is that the former order provides a complete indemnity for costs actually incurred, with no enquiry as to the reasonableness of the costs incurred. Whereas an order for solicitor/client costs requires an enquiry as to the reasonableness of the costs.
It is open to the Court to make a costs order on the basis of party/party costs, solicitor/client costs or indemnity costs.
When considering whether an order for indemnity or solicitor/client costs would be appropriate, it is instructive to revisit the decision of Sheppard J in Colgate-Palmolive v Cussons at 257 where his Honour reviewed the authorities and said:
4. …The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 ay 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6.It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
In Australian Transport Insurance Pty Ltd & Anor v Graeme Phillips Road Transport Insurance Pty Ltd& Ors (1986) 71 ALR 287 at 288 (“Australian Transport Insurance”), with respect to the Court’s discretion in the award of costs, Woodward J said:
That discretion is “absolute and unfettered”, but must be exercised judicially (Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where “there is some special or unusual feature in the case to justify the court exercising its discretion in that way” (Preston v Preston [1982] 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion — for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App 40 Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354.
Another case cited in argument was Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 where (at 502) Tadgell J allowed solicitor and client costs because he found the pursuit of the action to have been “a high-handed presumption”.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 at 401 Woodward J, with respect to the award of costs, referred to what he said in Australian Transport Insurance and stated:
No doubt the expression “high-handed presumption” was appropriate in the case Tadgell J [Australian Guarantee Corp Ltd v De Jager [1984] VR 483] had to decide, and he needed to go no further; but in order to establish a convenient principle in such cases it is necessary to be a little more prosaic. I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
(emphasis added)
The Court needs to be satisfied whether there are exceptional circumstances in this case which would enliven the discretion to depart from the general rule that each party pay his or her own costs, and make an order for costs on a solicitor/ client or indemnity basis.
I propose to deal firstly with the competing applications as between the wife and the husband.
WIFE AND HUSBAND
The Full Court found that the assets of the parties available for division totalled $4,857,728. That asset pool did not include the home in which the wife now lives that was purchased using funds provided by her parents and neither was the asserted loan from the wife’s parents for the purchase of the property included as a liability.
The wife will receive 55 per cent of the asset pool and the husband will receive 45 per cent of the asset pool. The proceeds of the sale of the jointly owned Suburb WX property have not yet been distributed.
The wife in her affidavit sworn 12 December 2019, deposes, at paragraphs 131 to 136 inclusive, her liabilities. She includes the asserted liability to her parents, including the funds provided for the purchase of her current home, but not the asset of the home.
The wife deposed that she has paid legal costs of $1,300,000 and I infer from paragraph 135 of her affidavit that the whole of those funds were provided by her parents and form part of the liabilities to which reference is made earlier.
The wife is not in paid employment.
The husband has also paid legal fees in the sum of $350,000 and owes a further $343,000. The husband’s paid costs have been paid from interim property settlement payments and thus from his own funds.
The husband is not in paid employment.
Because she will receive a greater share of the asset pool, and has the benefit of a house to live in which was provided by her parents, the wife’s financial position is superior to that of the husband.
Neither party was in receipt of Legal Aid.
The wife places heavy reliance on the husband’s conduct throughout the proceedings.
Her contentions are set out at paragraphs 11 to 52 of her written submissions.
I accept that the husband’s conduct, particularly in his entirely unsuccessful assertions that he and the wife were the owners of the property at H Street to the exclusion of Mr and Ms Gomes, unnecessarily exacerbated the costs of the proceedings.
However, that is not the only issue to be considered.
The wife’s case, as it was run at trial, is set out at paragraph 3 of these reasons. With the exception of an award of adult child maintenance for Mr G in the sum of $65,000, the wife was unsuccessful in the claims which she prosecuted. In relation to the adult child maintenance, it is to be noted that the wife sought $769,080.
Whilst I have accepted that the husband’s conduct in relation to the assertions of ownership of the H Street property unnecessarily exacerbated the costs, I also accept that the wife’s pursuit of a position which would have resulted in her receiving all of the assets of the marriage and the husband bearing all of the liabilities was entirely unsuccessful. The wife’s case, as it was run, would have resulted in the husband being left with liabilities of $3,025,616, together with a liability for periodic maintenance for the wife and for Mr G, and the husband receiving no assets.
As against the husband, the wife sought and pursued a claim for about 130 per cent of the net assets.
The husband’s position, articulated in his Response filed 5 June 2014, was that the wife should receive 60 per cent of the net assets and he 40 per cent. That position was amended in 2016 to include the requirement that the second respondent be paid a sum of money and again in September 2017 when he sought an order, inter alia, that he receive the B Street property and pay the wife $1,400,000.
Specifically, the wife was unsuccessful in her claims that:
· The second respondent had no interest in the H Street property.
· The second respondent was not entitled to the proceeds of sale of the Suburb L property.
· The husband was not entitled to any share of the jointly owned property.
· The wife was not a partner in the family business.
· The husband should be solely responsible for the debts arising from the operation of the family business including the substantial taxation liability.
· The husband had wrongfully disposed of the assets of the family business.
· The husband had committed waste by gambling.
· There should be an adjustment in her favour pursuant to the principle in Kennon.
· There should be orders for periodic maintenance for her and for Mr G.
All of these claims were fully ventilated in the course of the hearing and contributed to the costs incurred by the parties.
I have not been made aware of any offer of settlement made by the wife. The husband deposed that, from the time she filed her Amended Initiating Application in May 2014, the wife did not “make any proposal or give any indication that she was prepared to accept less than 100% of the matrimonial pool by way of settlement.”
The husband made an offer by letter dated 27 October 2017. I have not been provided with a copy of that letter but the wife refers to it in her written submissions. In that letter, the husband offered to purchase the interest of the wife in the B Street property for $1,400,000. The position embodied in that offer was the position of the husband at trial and, at trial, was not found to be practicable.
None of the matters to which I have referred persuades me that it is appropriate to make any order for costs. Each of the husband and the wife will bear the financial consequences of their decisions as to their respective conduct of the litigation.
The applications will be dismissed.
SECOND RESPONDENT
Each of the wife and the second respondent seeks, against the other, an order for indemnity costs or, in the alternate, an order for party and party costs.
Different considerations apply to the competing applications between the wife and the second respondent and, in order for the argument to be understood, some background information is necessary. The narrative which follows is more fully set out in the substantive reasons delivered on 6 March 2018.
The second respondent is the husband’s father. His command of the English language is very limited. He neither speaks nor reads English. He was not legally represented throughout the proceedings until part way through the final trial.
When the parties married, the husband owned a half interest in a property in Suburb O. The husband’s parents owned the other half.
In 1990, the second respondent and his late wife signed a document purporting to transfer their interest in Suburb O to the husband and the wife. No consideration was paid for the transfer. The effect of the document was not explained to the transferors. The second respondent did not understand that he was, in fact, transferring his interest in the property.
In 2000, the husband and the wife sold the Suburb O property and received $300,000. Those funds were applied by them to the purchase of a half interest in a property at H Street. The cost of the half interest was $600,000.
The second respondent and his late wife lived at the H Street property.
In 2006, after the death of the husband’s mother, the second respondent told the husband that he wanted to leave H Street and buy a house at Suburb L. He asked for $300,000. The husband drew the funds from a line of credit in the names of the husband and the wife, secured over a property owned by them. The Suburb L house was bought and registered in the name of the second respondent.
In July 2014 the second respondent sold Suburb L. The wife sought, and was granted, an order that the net proceeds of the sale be placed in a controlled monies account pending the determination of her claim that she and the husband were the beneficial owners of the property.
Thus the second respondent was left without a home and with no other assets or income.
Thereafter, the second respondent was a party to the proceedings, representing himself with the assistance of an interpreter and a Mackenzie Friend who was not a lawyer.
The second respondent continued to represent himself at the commencement of the final hearing where he sought an order that he receive the proceeds of sale of Suburb L and an order that the wife pay his costs on an indemnity basis.
However, the position of the second respondent changed in the course of the hearing, in part because of an order which provided him with funds with which he could seek legal advice. The genesis of those orders is set out in the substantive reasons:
89.Throughout the proceedings to that point, it was clear that the second respondent, although he had an interpreter and a Mackenzie Friend to assist him, quite understandably struggled with the complex legal issues which confronted the parties.
90.By this stage of the proceedings it was clear on the evidence that the second respondent had a substantial interest in H Street and would be entitled to the payment of a sum of money which, on any view, would exceed $50,000. The reasons for that conclusion are fully explored later in these reasons.
91.It was not in issue that the same considerations should apply to an interim distribution to the second respondent as would apply to an interim distribution to either the husband or the wife.
92.The payment to the second respondent of $50,000 represented a sum considerably less than his share of the proceeds of sale of Suburb O and, on any view of the evidence, an amount less than that he would receive in the final determination. Further, the money was available in cash in a controlled monies account which had been preserved by order of the Court.
93.Finally, the provision of funds to the second respondent facilitated his obtaining legal advice which was essential to ensure that his case was prosecuted in accordance with principles of law and equity.
The order for an interim distribution to the second respondent was made after all the evidence had been heard.
The matter was stood over for a short time to allow the second respondent to take advice. When the matter resumed, counsel for the second respondent sought, and, over objection, was granted leave to amend his application and sought a declaration that the husband and the wife held their interest in Suburb O on trust for the second respondent and his late wife; a claim that, as a consequence, the second respondent and his late wife were each beneficially entitled to one eighth of H Street (or one quarter of the interest of the husband and the wife); or, in the alternate, that the second respondent is entitled to the proceeds of sale of Suburb L.
The husband conceded the claim of the second respondent.
The wife did not.
The second respondent was ultimately successful in his claim of a beneficial interest in the H Street property of 12.5 per cent. The orders provided for a payment to the second respondent of $1,206,757, inclusive of the partial property settlement and the net proceeds of sale of Suburb L.
The wife’s submissions are to be considered against that factual background.
At paragraph 72 and following of her written submissions, the wife contends that the second respondent should pay her costs because of her financial position (which has been summarised earlier in these reasons) and “other s117(2) factors including but not limited to the outcome (wholly unsuccessful) and conduct of the second respondent.”
Turning then to the matters mandated by section 117(2).
The wife’s financial position as a result of the sale of the B Street property has been considered earlier in these reasons.
The second respondent received $1,206,757 and has spent $83,936.25 in legal fees. There was no evidence that the second respondent had any income from employment or any other assets.
The second respondent was not in receipt of Legal Aid.
The wife, in her written submissions, relies upon the conduct of the second respondent. At paragraph 74 she states:
The wife submits further that the second respondent never laid out his claim, never properly pleaded in accordance with the Rules or otherwise despite having legal representation at all material times...
It is submitted that the failure of the second respondent to properly make out his claim and to fulfil his obligations under the Rules and or orders made by the Court to particularise his claim(s) created an impossible position for the wife in relation to formulating her whole case...
I do not accept that submission.
Although it is true that the second respondent did not particularise his claim in accordance with the Rules, the nature of his claim and the basis upon which it was made were clear to the wife and, more relevantly, to her legal representatives including her very experienced counsel, at least by August 2016, more than a year before the final hearing commenced.
In reasons delivered on 24 August 2016, I summarised the claim of the second respondent, as I then understood it to be, in the following terms:
7.The second respondent is Mr B Zubcic, the father of the husband. He is unrepresented and does not speak English. His claim was articulated, with the assistance of an interpreter, for the first time in court on 18 August 2016. Broadly, he claims that when the husband and the wife purchased [H Street], he advanced $150,000 to them which was applied towards the purchase. The $150,000 came from the sale of a property in Suburb O owned by Mr B Zubcic, his wife, and the husband. Mr B Zubcic claims that there was an agreement between himself and the husband and the wife that, in consequence of the advance, he would become entitled to three acres of [H Street].
8. Mr B Zubcic claims that he negotiated to sell his three acres to the husband, or the husband and the wife, for $300,000, which money was used to buy a house at Suburb L where he then lived. Suburb L has been sold and the money is held pending determination of these proceedings. Mr B Zubcic will be required to file and serve an application setting out the orders he seeks and his evidence, including supporting documents, by 4 pm on 6 November 2016.
9.In relation to the claim of Mr B Zubcic, the wife denies that $150,000 was advanced by him towards the purchase of [H Street]. She asserts that the husband was a part owner of the property at Suburb O and any money received by him from the sale of that property was his money. She asserts that Suburb L was purchased by the husband, using a line of credit for the whole of the purchase price, and that the proceeds of the sale of Suburb L are the property of the husband and the wife.
10.In relation to the claim of Mr B Zubcic, the husband agrees that there was an advance from Mr B Zubcic of $150,000, but I have not been told what his attitude is to the balance of the claim.
At paragraph 100 of the substantive reasons, I stated:
The claim by the second respondent that he was entitled to three acres of H Street has been constantly iterated by him throughout the proceedings and remained his evidence in cross-examination before me in the substantive proceedings. That claim was also put by the second respondent to the wife in his cross-examination of her.
At paragraph 102 of the substantive reasons I set out the passage of transcript from the first day of the hearing where the issues to be determined were enunciated and agreed by counsel for the husband and the wife, concluding at paragraph 103:
Thus it was clear, and agreed, that the issue of the beneficial interest of the second respondent in Suburb O and thus in H Street was an issue that needed to be determined. It was within that framework that the parties, particularly the wife and the husband, conducted their respective cases.
I accept that the fact of the second respondent’s being unrepresented at the hearing and his clear inability to understand how to conduct his case or what was happening in the proceedings made the running of the case more difficult for the represented parties. I do not accept that, at least from August 2016, there was any lack of understanding on the part of the wife’s legal representatives of what his case was, what orders he sought and his basis for so doing.
It was the wife who joined the second respondent as a party to the proceedings in July 2014 by seeking to restrain him from dealing with the proceeds of sale of Suburb L. Until that application was filed, the second respondent had not sought any orders in relation to the property of the husband and the wife. Even after the second respondent was joined, it was his position for some time that he should be entitled to the Suburb L proceeds. The wife opposed that claim.
The husband at all times asserted that the second respondent was entitled to the proceeds of sale of Suburb L.
In relation to the claim of the second respondent, I do not accept the submission at paragraph 72 that the second respondent was wholly unsuccessful.
There was no aspect or element of the claim of the second respondent which did not succeed.
Rather, it was the wife’s opposition to his claim which was wholly unsuccessful.
The wife relies upon a letter forwarded to the second respondent on 26 August 2015 wherein she proposed that all parties attend mediation and that they each pay 25 per cent of the costs of the mediation. I do not accept that the letter constitutes an offer of settlement for the purpose of s117(2A)(f).
Reference is made in the wife’s written submissions to offers of settlement made in November and December 2017.
The final hearing commenced on 20 November 2017 and the evidence was concluded on 28 November 2017. The proceedings were then stood over until 5 December 2017 to allow the second respondent to get legal advice.
On 28 November 2017 the wife made an offer to settle on the basis that the second respondent receive the net proceeds of sale of Suburb L (about $306,000).
It would appear that the offer was repeated on 5 December 2017 and again on 6 December 2017.
The second respondent received in excess of 1.2 million dollars.
Taking all of those matters into account, it is appropriate that the wife pay the costs of the second respondent in relation to two aspects of the proceedings, firstly the costs incurred in relation to the proceedings in July 2014 where the wife joined the second respondent as a party to the proceedings and successfully restrained him from having access to the proceeds of sale of Suburb L, and secondly the costs incurred from 28 November 2017 when the second respondent was put in funds to seek legal advice and representation.
Should the wife pay those costs on an indemnity basis?
One of the examples given by Sheppard J in Colgate-Palmolive v Cussons which might warrant the making of an order for indemnity costs is where proceedings are commenced or continued with wilful disregard of known facts or clearly established law.
In this matter, although all of the evidence was not known to the wife when she commenced the proceedings against the second respondent in July 2014, she continued her opposition to his claims even after all of the evidence was known to her.
The wife was, at all material times, represented by experienced solicitors and an experienced barrister.
She (and her representatives) were specifically aware of the following matters at an early stage of the proceedings:
· That the second respondent did not speak or read English with any competence.
· That no consideration was paid for the transfer of the Suburb O property (the settlement statements relating to the acquisition were in the wife’s possession – see paragraphs 138 to 143 of the reasons).
· From at least August 2016 of the basis upon which the second respondent’s claim was advanced.
· On 27 November 2017, the evidence having been completed, I placed on transcript the questions which the parties would be asked to address in submissions in the following terms:
So the first question is, has it been established that the purported transfer of the Suburb O property was effective to transfer the interest of Mr and Ms B Zubcic Senior to the husband and the wife. If that transaction did not effectively transfer their interest, did Mr and Ms B Zubcic Senior retain the beneficial ownership of 50 per cent of Suburb O?...
If the transfer was not effective, what was the interest of Mr and Ms B Zubcic Senior in the proceeds of sale of Suburb O? Given that it is an agreed fact that the proceeds of sale of Suburb O were used for the purpose of the purchase of H Street, did an equity arise in H Street in favour of Mr and Ms B Zubcic Senior? If such an equity arose, what was the nature of the equitable interest? And it follows from that question, did Mr and Ms B Zubcic Senior have an interest in the proceeds of sale of H Street? If they had such an interest, how should it be quantified?
Given that it seems to be an agreed fact that the money for the purchase of Suburb L came entirely from the husband and the wife, did the husband and the wife acquire an equitable interest in Suburb L? And what was the nature of that interest? It seems to me that those were the questions that I have to answer in order to resolve what is, in fact, the property of the husband and the wife on the one hand and the property of Mr B Zubcic on the other hand. If the evidence leads me to the conclusion that the – that Mr Zubcic and Ms Zubcic retain their interest in Suburb O – Mr and Ms B Zubcic Senior retain their interest in Suburb O, does that have the effect that, having contributed 25 per cent of the purchase price of the interest of the husband and the wife, they were entitled to 25 per cent of the proceeds of sale of H Street and in what circumstances should Mr B Zubcic be permitted to amend his claim to take into account any finding that I might make.
And I suppose the ultimate question is to what extent am I obliged to allow Mr B Zubcic to amend his claim to take into account whatever findings I might make, but how can I do so with – but also at the same time extending procedural fairness to the husband and the wife. I might – I would like to say this, though, that the questions I have raised – I assume – have been questions in the minds of counsel for quite a long time and I do not in any way criticise Mr B Zubcic Senior for not understanding that the circumstances of this transaction might give rise to consequences that a person who is not a lawyer might not understand. So I think, having posed those questions, all I can say is that I will look forward to your answers tomorrow.
The wife persisted with her claim that the second respondent had no interest in the proceeds of sale of H Street in the face of compelling evidence to the contrary.
I consider that those circumstances justify the making of an order that the wife pay indemnity costs.
The second respondent’s costs are $83,936.25. The costs have been itemised and provided to the wife.
There is no specific challenge to the quantum of the second respondent’s costs.
In oral submissions, counsel for the wife sought an order that the costs of the second respondent be assessed.
I do not propose to order assessment.
The costs in relation to the early involvement of the second respondent, when he was brought into the proceedings by the wife seeking a declaration to the effect that the proceeds of sale of Suburb L, are $25,334.63.
The costs of his representation at the trial are $58,601.62, including counsel’s fees.
On their face, the amounts appear reasonable.
These proceedings have been on foot since 2013. The second respondent was brought into the matter in 2014. The second respondent was without access to his funds, at least in relation to the proceeds of sale of Suburb L, since July 2014.
Section 117(2) of the Act provides:
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), (4A), (5) and (6) 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.
I do not consider it just that there should be any further delay or any further costs incurred by requiring the second respondent’s costs to be assessed.
I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 13 March 2020.
Associate:
Date: 13/03/2020
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