Kardos v Sarbutt

CATCHWORDS: FAMILY LAW - COSTS - De facto relationships - costs of property adjustment proceedings where amount recovered is less than jurisdictional limit of Local Court - costs of property adjustment proceedings where neither party can be said to have been wholly or substantially successful or to have bettered offer - "substantial success" - APPEAL - effect of substituted judgment.

(CTH) Family Law Act, s 117 (NSW) Civil Procedure Act 2005, ss 98, 99, 101(3) (NSW) Conveyancing Act 1919, s 66G (NSW) Courts Legislation Amendment Act 2003, Schedule 6(1) (NSW) District Court Act 1973, s 134(1)(g), s 134(3) LEGISLATION CITED: (NSW) Local Court (Civil Claims) Act 1970, s 12 (NSW) Property (Relationships) Act, s 10 (NSW) Suitors Fund Act, s 6 (NSW) DCR Pt 39A r 12, Pt 51D r 1 (NSW) SCR Pt 52 rr 22, 24, 24A, 34, 35 (NSW) UCPR rr 36.4, 42.30

Butcher v Pooler (1883) 24 Ch D 273 Chanter v Catts (No 2) [2006] NSWCA 179 Crellin v Robertson [2005] ACTSC 36; (2005) DFC 95-316 Deves v Porter [2003] NSWSC 878 Gould v Vaggelas (1985) 157 CLR 215 Government Insurance Office (NSW) v Healy [No. 2] (1991) 22 NSWLR 380 Hamer v Giles (1879) 11 Ch D 942 Harris v Schembri (NSWSC, 7 November 1995, unreported, BC 9501757) Hawkins v Parsons (1862) 8 Jur (NS) 452; CASES CITED: Kardos v Sarbutt [2006] NSWCA 11 Magera v MacIntosh (No 2) (2005) DFC 95-319 Newton v Taylor (1827) 19 Eq 14 Nicholson v Nicholson (No 2), Court of Appeal (BC9504206), 1 February 1995 NSW Insurance Ministerial Corporation v Gomes (No 2), Court of Appeal (BC9807723), 3 December 1998 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 Parsons v Hayward (1862) 4 De GF&J 474 Shellharbour City Council v Johnson [No 2] [2006] NSWCA 114 Van Zonneveld v Seaton [2005] NSWSC 175 Vollmer v Hauber Davidson [2006] NSWCA 79

PARTIES: Tristan Jane Kardos (Appellant) Paul Ventriss Sarbutt (Respondent)

COUNSEL: D Alexander (Appellant) E Cohen (Respondent)

SOLICITORS: Maguire & McInerney, Wollongong (Appellant) Johnson Horsley Lawyers, Wollongong (Respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40142/05

BASTEN JA HUNT AJA BRERETON J

Thursday 27 July 2006 KARDOS v SARBUTT [NO. 2] Headnote

In proceedings for property adjustment under Property (Relationships) Act, s 20, the District Court awarded the respondent an adjustment of $100,000, with costs. The Court had allowed an appeal, substituting an adjustment of $36,075. The appellant opposed any costs order in favour of the respondent in respect of the first instance proceedings, and the respondent opposed any costs order in favour of the appellant in respect of the appeal.

As the respondent had recovered less than the jurisdictional limit of the Local Court, he was not entitled to costs unless the Court otherwise ordered: SCR Pt 52A r 34; DCR Pt 51D r 1; UCPR r 42.30.

In proceedings for de facto property adjustment, whether or not a costs order is made, and/or "capped", will be influenced by a number of considerations, that do not typically affect ordinary money claims, including (a) the quantum of the adjustive order, (b) the analogy with matrimonial proceedings, in which the starting point is that each party bears his and her own costs, and with partnership and Conveyancing Act, s 66G, proceedings, in which ordinarily costs are paid out of the partnership or joint property; (c) whether any party has been wholly or substantially successful, or has "bettered" an offer of compromise; and (d) the conduct of the parties in the proceedings, and in particular whether one has been disproportionately responsible for the incurring of costs through the manner in which he or she has conducted the proceedings: Harris v Schembri (NSWSC, 7 November 1995, unreported, BC 9501757); Deves v Porter [2003] NSWSC 878; Van Zonneveld v Seaton [2005] NSWSC 175; Crellin v Robertson [2005] ACTSC 36; (2005) DFC ¶95-316; Magera v MacIntosh (No 2) (2005) DFC ¶95-319; considered.

Except where one party has been wholly or substantially successful, or has "bettered" its offer of compromise, the starting position should be that each party should bear its own costs, all the more so where the quantum of the adjustment is within the jurisdiction of the Local Court. "Substantial success" requires more than that a plaintiff obtains an adjustment in his or her favour; it involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other, to the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position: Vollmer v Hauber Davidson [2006] NSWCA 79, followed; Chanter v Catts (No 2) [2006] NSWCA 179, considered.

Both parties determined how the proceedings were conducted; neither party was more responsible than the other for the incurring of costs; it was necessary from the perspective of both that their property interests be separated; the proceedings, and therefore their costs, were an incident of the breakdown of the relationship; in the absence of realistic offers of compromise by either party, both should share responsibility for the costs of the proceedings. There should be no order as to the costs of the proceedings at first instance (apart from the interlocutory and caveat proceedings), to the intent that each party bear his and her own costs.

There is no basis for disturbing the trial judge's decision that the costs of the interlocutory and caveat proceedings should be borne by Ms Kardos.

The order that Mr Sarbutt pay Ms Kardos' costs of the appeal to this court, in which she was substantially successful, should stand, together with the order that Mr Sarbutt have a certificate under the Suitors' Fund Act.

1. Set aside order 2.2 made on 14 February 2006 and substitute: "That the defendant pay the plaintiff's costs of proceedings 13352 of 2003 in the Supreme Court, Equity Division and of the interlocutory proceedings in the District Court up to 1 April 2004, and that otherwise there be no order as to costs, to the intent that each party bear his and her own costs".

2. Dismiss the application to set aside and/or vary Orders 3 and 4 made on 14 February 2006.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40142/05

BASTEN JA HUNT AJA BRERETON J

Thursday 27 July 2006 KARDOS v SARBUTT [NO. 2] Judgment 1 BASTEN JA: I have had the benefit of reading in draft the judgment of Brereton J set out below. I agree with the orders his Honour proposes and with the reasons for the orders. 2 At [54]-[57] his Honour makes some additional comments in relation to correspondence received from the parties with respect to the effect of the orders made on 14 February 2006. This correspondence purported to seek from the Court clarification, and indeed "advice", with respect to the time for payment of the judgment debt. It should be stated in unequivocal terms that the correspondence was inappropriate and should not have been sent. The orders of the Court speak for themselves. If there is an application to vary those orders, it should be made on a motion seeking leave to reopen the judgment. No such application was made or foreshadowed. Where leave is given to file further submissions after judgment is delivered, no further material should be received except that provided in compliance with the grant of leave. 3 The orders of 14 February 2006 not only stated expressly that the relevant orders were made in substitution for the orders made by the District Court, but also that those orders were to have effect from 21 February 2005, being the date on which final orders had been made in the District Court. The power to make an order in those terms may be found in r 36.4 of the Uniform Civil Procedure Rules 2005 (NSW). The effect of the order raises quite different issues. Not only was this not a matter raised on the appeal, nor one in relation to which submissions have been entertained, but it may also raise issues of more general concern. Further, the answer may depend upon the circumstances of the particular case. Thus, in considering a rule in similar terms to s 75A(10) of the Supreme Court Act 1970 (NSW), the High Court stated in Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 318: "Although the presumption is that the order of the appellate court takes effect from the date on which it is made, it will sometimes be possible to infer from the terms of the order an intention that it operate with effect from the date of the order at first instance." 4 The date from which a judgment takes effect will have significance in relation to the interest payable on so much of the judgment as remains outstanding for a period in excess of 28 days: Civil Procedure Act 2005 (NSW), s 101(3); and see the issue raised in Gould v Vaggelas (1985) 157 CLR 215 at 274. The practical consequences in a particular case may depend upon whether the judgment below has been stayed and, if so, on what terms. The judgment on appeal may give rise to an obligation to make a further payment or to make restitution of an amount paid in excess of the final judgment. Again, these questions can have consequences in terms of interest payments: see Government Insurance Office (NSW) v Healy [No. 2] (1991) 22 NSWLR 380 at 385-387 (Kirby P). The form in which an order is made by this Court will often depend upon the form of the order sought by the appellant or cross-appellant. Often the precise form of the order sought is not debated; in some cases, parties may have a common understanding as to the effect of a particular order. These are all factors which a ruling on this issue would need to take into account. Accordingly, it is not appropriate to make further comment in relation to the date from which a judgment of this Court operates. 5 HUNT AJA: I agree with the judgment of Brereton J, and with the additional comments of Basten JA. I understand the general practice of this Court when substituting an amount different from that awarded at first instance is to order that the judgment is to take effect from the date of the order at first instance so that the party to whom the amount is payable obtains the benefit of interest on the sum found on appeal to be the proper amount from the date of the judgment at first instance and is not penalised by reason of the error established on appeal: Nicholson v Nicholson (No 2), Court of Appeal (BC9504206), 1 February 1995, at 1-2; NSW Insurance Ministerial Corporation v Gomes (No 2), Court of Appeal (BC9807723), 3 December 1998, at 3; Shellharbour City Council v Johnson [No 2] [2006] NSWCA 114 at [22]. 6 BRERETON J: On 14 February 2006, the court gave judgment in these proceedings [Kardos v Sarbutt [2006] NSWCA 11] allowing the appeal, setting aside the orders of the District Court made on 7 February and 21 February 2005, and substituting with effect from 21 February 2005 orders that by way of adjustment and settlement of property interests the appellant/defendant Ms Kardos pay the respondent/plaintiff Mr Sarbutt $36,075 (Order 2.1), and that Ms Kardos pay Mr Sarbutt's costs of the proceedings (Order 2.2). The court ordered that Mr Sarbutt pay Ms Kardos' costs of the appeal (Order 3), but be granted an indemnity certificate under the Suitors Fund Act, s 6 (Order 4). However, as the costs issues had not been argued, the court reserved leave to the parties to apply to set aside the Orders 2.2 and 3 and for different costs orders, such application to be made and conducted on written submissions.

The Applications and Issues 7 On 17 February 2006, Ms Kardos lodged a submission, a copy of which was forwarded to Mr Sarbutt's solicitors, by which she sought to have Order 2.2 set aside. Although the submission did not articulate with precision what order was sought in its place, it proposed that Ms Kardos should receive some (unspecified) part of her costs in the District Court proceedings.

8 On 20 February 2006, Mr Sarbutt lodged a submission applying for the following:-

· in relation to Order 2.2, that the costs payable by Ms Kardos include his costs incurred in proceedings, commenced in the Equity Division (No 13352 of 2003) and thereafter in the District Court to 1 April 2004, in which he applied successfully for an order extending the operation of a caveat affecting property of Ms Kardos which was the subject of his claim; and · that Orders 3 and 4 be set aside, and that there be no order as to the costs of the appeal, to the intent that each party bear its own costs. 9 Due to an oversight in service of Mr Sarbutt's submission, Ms Kardos' submission in reply was not lodged until 30 March 2006. Since then, the court has received unsolicited correspondence from the parties as to time for payment and the accrual of interest under its orders. 10 The issues which now fall for consideration are:- · What costs order should be made in respect of the proceedings at first instance, in the light of the ultimate outcome of the appeal; · Whether any special order should be made in respect of the interlocutory proceedings for extensions of the caveat and preservation of property; · What costs order should be made in respect of the appeal.

The costs of the first instance proceedings 11 The costs order made by Quirk DCJ on 21 February 2005 was in the following form: 4. The defendant [Ms Kardos] pay the plaintiff's [Mr Sarbutt] costs (including the costs of the Supreme Court proceedings). 5. The costs be on a solicitor/client basis from 27 October, 2004.

12 That order was made in the context that Mr Sarbutt had obtained an adjustive property order in his favour of $100,000, having offered to accept $70,000. The context now is quite different. For the reasons anticipated in the judgment of 14 February 2006 - namely that the order substituted by this Court was less than the amount which Mr Sarbutt had offered to accept - there is no longer any reason why Mr Sarbutt should receive costs in respect of the first instance proceedings on a solicitor/client or indemnity basis, and no party has submitted otherwise. The question is whether any and if so what costs order should be made in his favour at all in respect of the first instance proceedings, leaving to one side for the moment those associated with the caveat proceedings in the Supreme Court and the proceedings for interlocutory relief. 13 For Ms Kardos, Mr Alexander submits that, although an adjustive property order was made in favour of Mr Sarbutt, it was one within the jurisdiction of the Local Court, and that either no costs order should be made, or any order should be capped at the amount of the adjustment ($36,075). Mr Alexander submitted that while the court has a discretion to award costs in proceedings under the Act, and while it is generally said that the starting position is that costs ought to follow the event, in the context of this type of proceeding that discretion will often require particular consideration, having regard to the impact of a costs order on the overall justice and equity of any adjustive property order, the size of the asset pool, and the considerations reflected in Family Law Act, s 117 (which has the effect that in equivalent proceedings between married spouses, the prima facie position is that each party bears his and her own costs). He invoked DCR Pt 39A r 12 (which imposed limitations on the recoverability in the District Court of costs in actions which could have been brought in a Local Court), and (at least by analogy) SCR Pt 52 r 24A (which provided, before 30 June 1994, that a plaintiff in proceedings in the Supreme Court under the De Facto Relationships Act was not entitled to costs, unless the court otherwise ordered, where the interest in property adjusted was of a value which did not exceed the jurisdictional limit of the Local Court). 14 Proceedings for de facto property adjustment, whether in the Local Court, the District Court or the Supreme Court, are of course not subject to Family Law Act, s 117 or any equivalent, and costs are in the general discretion of the court, now under Uniform Civil Procedure Act, ss 98 and 99, and formerly under equivalent provisions in the Supreme Court Act, the District Court Act, and the Local Court (Civil Claims) Act.

15 Rules of Court make provision for costs consequences where the amount of an adjustment awarded is less than the jurisdictional limit of the Local Court. Under Property (Relationships) Act, s 10, the Local Court has jurisdiction, in relation to property, to adjust an interest of a value or amount not in excess of the amount prescribed for the time being as the jurisdiction of that court under Local Courts (Civil Claims) Act 1970, s 12. When these proceedings were commenced in the District Court on 18 March 2004, the Local Court had jurisdiction under the Civil Claims Act up to $60,000 (pursuant to Courts Legislation Amendment Act, 2003, Schedule 6(1) with effect from 1 January 2004). Under District Court Act 1973, s 134(1)(g), the District Court has the same jurisdiction as the Supreme Court in proceedings for "any application under the Property (Relationships) Act 1984", but (by s 134(3)) in such proceedings may not make an order for financial adjustment that will or may result in the amount of the adjustment so made exceeding $250,000. 16 At the time when these proceedings were instituted and determined, DCR Pt 39A r 12 (relied on by Mr Alexander) provided that if in any action which could have been brought in a Local Court, but which was brought in the District Court, the plaintiff recovered a total amount which did not exceed, relevantly, $10,000, the plaintiff should not be entitled to recover any costs, unless the court certified that there was sufficient reason for bringing or trying the action in the District Court. As the sum of $36,075 ultimately recovered exceeds the sum of $10,000 referred to in Pt 39A r 12(3)(e)(ii), that rule is not applicable, and I would reject Mr Alexander's submission that Pt 39A r 12 has any application to this case, or provides any reason for declining to make a costs order in Mr Sarbutt's favour. 17 SCR Pt 52 r 24A, referred to by Mr Alexander as being relevant by analogy, applies to proceedings under the De Facto Relationship Act in the Supreme Court before 30 June 1994. Neither party in their submissions referred to (former) DCR Pt 51D r 1 (see now UCPR r 42.30), which at the relevant time provided as follows: 1. The following rules of the Supreme Court Rules 1970 apply to proceedings before the District Court under the Property (Relationships) Act 1984 in the same way as they apply to proceedings before the Supreme Court: a. Part 52, rule 24A ( De Facto Relationships Act 1984), b. Part 52, rule 24B (orders for non-application of rules 24 and 24A), c. Part 52A, rule 34 ( Property (Relationships) Act 1984), d. Part 52A, rule 35 (orders for non-application of rules 33 and 34), and e. Part 77, division 19 ( Property (Relationships) Act 1984), rule 74-76A.

18 Nor did either party refer to SCR Pt 52A r 34 which, when these proceedings were instituted, relevantly provided as follows: 34. Where the plaintiff commences proceedings in the court for an order or relief under the Property (Relationships) Act 1984 and the court: a. in relation to property, declares a right or adjusts an interest, or b. makes an order for maintenance, of a value or amount which does not exceed the amount prescribed at the time of commencement of the proceedings by section 12 of the Local Courts (Civil Claims) Act 1970: c. the plaintiff shall not be entitled to payment of his or her costs of the proceedings unless the court otherwise orders, and d. where the court makes an order for the payment of the plaintiff's costs of the proceedings and the costs are assessed on a party and party basis or an indemnity basis under rule 22(4), the costs of briefing more than one counsel for the plaintiff shall not be allowed unless the court or the assessor otherwise orders. 19 SCR Pt 52A, r 35 provided for an order to be made prospectively, before the institution of proceedings, or during the proceedings, that rule 34 not apply in respect of proceedings to be commenced or commenced in the court. No such order was made in this case. Accordingly, the starting point for consideration of the question of costs of the first instance proceedings is that fixed by SCR Pt 52A r 34, as applied by DCR Pt 51D r 1 (or their corresponding UCPR successors), namely that Mr Sarbutt having recovered less than the jurisdictional limit of the Local Court is not entitled to costs unless the Court otherwise orders.

20 The question of costs, and the application of SCR Pt 52A, r 34 (or its predecessor, r 24A), in cases where only a small adjustive order has been made, has been considered in several cases. In Harris v Schembri (NSWSC, 7 November 1995, unreported, BC9501757), where the adjustment in favour of the plaintiff was $31,500, Bryson J took into account, in making no order as to costs: · SCR Pt 52 r 24(2), which provided that a plaintiff who recovered not more than $75,000 was not ordinarily entitled to costs, but may be awarded costs for sufficient reason. His Honour thought this rule, though not literally applicable to proceedings in the Equity Division or to claims for adjustment of interests in property, was analogous to the circumstances; · SCR Pt 52 r 24A, which provided that a plaintiff in proceedings under the De Facto Relationships Act was not entitled to costs, unless the court otherwise ordered, where the proceedings were to declare a right or adjust an interest in property of a value which did not exceed the jurisdictional limit of the Local Court, which was then $40,000; and · Family Law Act, s 117, to the effect that in proceedings for property adjustment between parties to a marriage, each bears his and her own costs unless the court otherwise orders, which his Honour thought was analogous, though not directly applicable. 21 In Deves v Porter [2003] NSWSC 878, the plaintiff obtained an adjustment of $20,800, on two separate bases - under the Act, and on the basis of a constructive trust. The plaintiff had made offers to settle for $20,000 (exclusive of costs), and less. SCR Pt 52A r 34 had the consequence that the plaintiff could not recover costs unless the court otherwise ordered, because the adjustment was less than $40,000, the then limit of the jurisdiction of the Local Court; but as the plaintiff had required an extension of time to bring proceedings under the Property (Relationships) Act, the grant of which was not a foregone conclusion, and otherwise could only have succeeded on the constructive trust basis, she was held justified in bringing proceedings in the Supreme Court. Campbell J said that it was a useful rule of thumb in proceedings for property adjustment under Property (Relationships) Act 1984 that the costs awarded ought not exceed the amount recovered. For this, his Honour drew on observations of Young CJ in Eq in Carroll v Cowburn [2003] NSWSC 248 (at [36]) to the effect that in claims under the Family Provision Act a useful guideline was that the plaintiff's costs be capped at an amount equal to the amount of extra provision made for the plaintiff, which his Honour applied in Foster v Lisle [2003] NSWSC 1243 [76]. In Deves v Porter, applying this "rule of thumb", the recoverable costs were limited to $20,800.

22 In Van Zonneveld v Seaton [2005] NSWSC 175, the court had awarded the plaintiff de facto husband an adjustment in his favour of $51,000 (in the context that he had made only one offer, before commencing proceedings, of $120,000, and his application was for in excess of $600,000, but where the defendant had made offers during the proceedings of only $20,000 and $40,000). Campbell J allowed the plaintiff his costs, essentially for the reason that the defendant could have made an offer of a size, that would have provided her with protection but did not do so. However, his Honour capped the costs order at $100,000, emphasising that while Deves v Porter provided a useful rule of thumb, any such "rule of thumb" was not a substitute for the exercise of a discretion bearing in mind all the facts of a particular case, and the case before him was different because there were building and valuation issues which involved increased costs, large disbursements and expert evidence.

23 In Magera v MacIntosh (No 2) (2005) DFC ¶95-319, the successful plaintiff ultimately received an order adjusting interests in his favour by $20,000, where the defendant had until the hearing completely denied in her pleadings and affidavit evidence the existence of a de facto relationship at all, but had also made an offer of compromise under the rules of $50,000 plus costs (to which the plaintiff had responded with a counter offer of $125,000 plus costs). Balancing the small amount recovered, and the defendant's offer of compromise, with the defendant's unreasonable denial of a relationship, Campbell J made no order as to costs. His Honour regarded as relevant: · SCR Pt 52A r 34(c), which had the effect that a plaintiff was not entitled to costs, unless the court otherwise ordered, where the amount recovered was less than the jurisdictional limit of the Local Court; and · SCR Pt 52A r 22(6), which provided that where the defendant made an offer of compromise which was not accepted nor bettered by the plaintiff, then the plaintiff should unless the court otherwise orders be entitled to costs up to the date of the offer, and the defendant should be entitled to costs thereafter.

24 In Crellin v Robertson [2005] ACTSC 36; (2005) DFC ¶95-316, the Supreme Court of the Australian Capital Territory made an adjustive property order in favour of the plaintiff for $17,750. The plaintiff submitted that costs should follow the event, but the defendant argued that the plaintiff should pay the defendant's costs, in the light of a number of generous offers made by the defendant "without prejudice except as to costs". Crispin J ordered that the defendant pay the plaintiff's costs to August 2001 (by which date the first offer ought to have been accepted) and that the plaintiff pay the defendant's costs thereafter, saying that the costs of the ensuing litigation were attributable to the plaintiff's failure to accept a reasonable offer, but that justice would be sufficiently done by a party/party costs order.

25 These cases suggest that, in proceedings for de facto property adjustment, whether or not a costs order is made, and/or "capped", will be influenced by a number of considerations, that do not typically affect ordinary money claims. 26 The first is the quantum of the adjustive order. Particularly where only a small adjustive order is made, which would have been within the jurisdiction of the Local Court, a successful plaintiff will prima facie not be entitled to costs [SCR Pt 52A, r 34; UCPR r 42.30], and even if the Court otherwise orders, the costs order may still be "capped", so that the costs are not disproportionate to the result. There are many reasons why the Court might "otherwise order". The amount of an adjustment ultimately ordered may not bear any relationship to the extent of the pool of property in issue in the case; a large pool of property, which involves complex valuation issues, may nonetheless ultimately produce only a small adjustment. Insofar as the rules of court are intended to promote selection of the appropriate forum, the wide ambit of the range of judicial discretion in this field means that such a rule should be applied with caution, except in the most obvious cases. The business of the Local Courts is such that they are not well equipped to hear lengthy cases involving large property pools. Nor is it likely that the costs of such a case, if conducted in a Local Court, would be significantly less than in the District Court. Although the Deves "rule of thumb" is of some utility in maintaining proportionality between the costs of proceedings - and thus the detail in which and extent to which they are litigated on the one hand - and the value of the interest at issue on the other, it is at best a rough and arbitrary guide; its shortcomings are illustrated by the circumstance that the costs of a successful defendant are not limited, regardless of how little was in dispute.

27 The second consideration is the analogy with matrimonial proceedings, in which the starting point is that each party bear his and her own costs. In this respect, the Law Reform Commission Report (NSWLRC 36 (1983)), "De Facto Relationships", which presaged the introduction of the predecessor of the Property (Relationships) Act 1984, although containing extensive reference to provisions of the Family Law Act, by way of comparison and contrast with the proposed jurisdiction to adjust financial relations between de facto partners, has no specific discussion of costs. There appears to have been no consideration as to whether the approach of Family Law Act, s 117 should be adopted. In respect of the enforcement of orders, the Law Reform Commission Report envisaged that the rules of court relating to the enforcement of its ordinary judgments and orders would cover the enforcement of judgments given or orders made pursuant to the adjustive property jurisdiction; it may be inferred that the question of costs in such proceedings was likewise not seen as requiring special consideration, but would fall in the court's general discretion as to costs.

28 However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [Hawkins v Parsons (1862) 8 Jur (NS) 452; Parsons v Hayward (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [Hamer v Giles (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [Hamer v Giles; Warner v Smith (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [Butcher v Pooler (1883) 24 Ch D 273; Newton v Taylor (1827) 19 Eq 14]. Similarly, in proceedings under Conveyancing Act, s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership.

29 In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer. Similar views have been expressed by Hislop J, with whom Mason P and Ipp JA agreed, in Vollmer v Hauber Davidson [2006] NSWCA 79, as follows (at [21]):- a) In the absence of agreement between the parties it was necessary for them to resort to the courts, whether pursuant to the Act, the Conveyancing Act 1919 s 66G or general equitable principles to obtain finality in respect of their property interests. b) The parties were unable to reach agreement in respect of the adjustment of their interests, neither being prepared to make a realistic settlement offer to the other. c) In these circumstances the commencement of the court proceedings was necessary from the perspective of each party, not just the respondent. d) The fact that the respondent issued a Statement of Claim and the appellant a Cross-Claim, rather than vice versa, was a chance event. Accordingly it should not be regarded as a relevant factor in determining the costs issue, a proposition which counsel accepted on the appeal. e) The effect of the Master's adjustment of the parties' interests was that the appellant's share of the property was valued at approximately $220,000, the respondent's at approximately $520,000. As is apparent from a comparison of the Master's orders and the pleadings, each party was unsuccessful in that he or she failed to obtain the adjustment that he or she sought, though each was successful in exceeding the adjustment that the other party offered. These were material considerations which were not taken into account by the Master.

30 Subsequently, in Chanter v Catts (No 2) [2006] NSWCA 179, Hodgson JA, with the concurrence of Bryson JA and Hunt AJA, said that Vollmer did not tell against the award of costs to a plaintiff on the basis of "substantial success", where the plaintiff, on appeal, obtained a result which bettered the defendant's offer by $60,000. Hodgson JA said (at [6]):- In my opinion, although the proceedings achieved less than the appellant claimed, the result is substantially better than the appellant could have obtained without court proceedings and counts as substantial success. I do not think that Vollmer counts against costs being awarded on the basis of that substantial success.

31 For this purpose, "substantial success" is not to be judged merely by the circumstance that a plaintiff obtains an adjustment in his or her favour. It involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other, to the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than to the matters referred to by Hislop J in Vollmer - including, in particular, the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position.

32 Moreover, proceedings for property adjustment almost invariably involve the division of an identified pool of property having regard to the considerations prescribed by s 20 of the Act, and costs orders made in isolation from that process have the potential to impact on the justice and equity of the overall result. As an illustration, using figures which might approximate the present case, if in the context of a pool of property worth $1 million, the plaintiff was held entitled to 40% (or $400,000), and each party had incurred costs of $100,000, then a costs order in favour of the plaintiff would result in the defendant bearing all the costs, and each party receiving 50% ($400,000) of the pool net of costs ($800,000), whereas if the costs came out of the pool first, the plaintiff would receive 40% of $800,000, or $320,000, and the defendant $480,000.

33 The third consideration is whether any party has been wholly or substantially (in the sense already described) successful (in obtaining the order sought), or has "bettered" an offer of compromise.

34 A fourth consideration is the conduct of the parties in the proceedings, and in particular whether one has been disproportionately responsible for the incurring of costs through the manner in which he or she has conducted the proceedings.

35 The second and third considerations support the view that, except where one party has been wholly or substantially successful, or has "bettered" its offer of compromise, the starting position should be that each party should bear its own costs. The first consideration suggests that that will be all the more so where the quantum of the adjustment is within the jurisdiction of the Local Court.

36 There is no evidence as to what the costs of either party are likely to be, although it goes without saying that the costs of both parties of a contested four day hearing in the District Court will be substantial. The pool of property in issue exceeded $1,000,000. Mr Sarbutt sought an adjustive order in his favour of $150,000. Ms Kardos filed a cross-claim seeking an adjustment in her favour of $180,000, which totally failed, but which added nothing to the litigation. Although there was an adjustive property order made in favour of Mr Sarbutt, which technically represents success on "the event" for Mr Sarbutt, the order which he ultimately gained was very much less than that which he had sought, and significantly less than he had offered to accept, although it was significantly greater than that which Ms Kardos sought, or had offered to pay. Neither party bettered their offer of settlement. [Mr Alexander's submissions assert that Ms Kardos offered Mr Sarbutt $10,000, and Mr Sarbutt offered to settle for $70,000].

37 In those circumstances, Mr Sarbutt was compelled to litigate to obtain the result that he did, but equally Ms Kardos was, in the absence of a realistic offer from Mr Sarbutt, compelled to defend the proceedings. It is unduly artificial to conclude that because Mr Sarbutt as plaintiff had to litigate to obtain the result he did, a costs order in his favour is warranted The answer to the proposition that the most effective way in which the costs of the proceedings might have been contained would have been by Ms Kardos making an offer which approximated the amount which Mr Sarbutt recovered, is that equivalently Mr Sarbutt might have sought, or offered to accept, such an amount rather than his much higher claim or offer. His success fell far short of what he sought. It was not "substantial success".

38 The trial took was contested over four days. Of those four days, three were occupied by the taking of evidence, and the last by submissions. Ms Kardos' principal affidavit comprised twenty-one pages of text, Mr Sarbutt's twelve. Of the 213 pages of transcript, 211 relate to the first three days (submissions were not transcribed), of which 76 were occupied by cross-examination, by Mr Alexander, of Mr Sarbutt, and 69 were occupied by cross-examination of Ms Kardos.

39 Arguments, advanced on behalf of Ms Kardos, that Mr Sarbutt could have limited the costs of proceedings by abandoning valuation and detail in the proof of his contribution as home renovator, suffer from the difficulty that proper proof of contributions requires descent into detail. Given the competing claims and positions of the parties, it was not reasonable to expect Mr Sarbutt to jettison the quantity surveyor's evidence in the interests of expedition. In any event, the quantity surveyor's evidence occupied only six pages of transcript. I would not accept the submission on behalf of Ms Kardos that the litigation was unnecessarily complicated by the approach of Mr Sarbutt and particularly by his use of a quantity surveyor. It is not apparent that either party is more responsible than the other for the incurring of costs.

40 Both parties determined how the proceedings were conducted, and in the absence of realistic offers of compromise both share responsibility for the costs of the proceedings. In truth, given the respective position of the parties, both were compelled to litigate: it was necessary from the perspective of both that their property interests be separated, and neither made an offer which was significantly more realistic than the other's. The proceedings, and therefore their costs, were an incident of the breakdown of the relationship. Visiting the costs of a four-day trial on Ms Kardos would have a disproportionate impact on the overall justice and equity of the outcome. 41 Accordingly, the overall justice of the case does not warrant departure from the starting point, prescribed by (former) SCR Part 52A r 34(c), as applied to proceedings in the District Court by (former) DCR Pt 51D r 1, that Mr Sarbutt is not entitled to costs of the proceedings at first instance. There should be no order as to the costs of the proceedings at first instance (apart from the interlocutory proceedings, to which I shall come), to the intent that each party bear his and her own costs.

The Interlocutory Proceedings 42 The costs order made by Quirk DCJ on 21 February 2005 had the effect of including, in the costs payable by Ms Kardos, Mr Sarbutt's costs of the Supreme Court caveat proceedings. The costs of the interlocutory proceedings in the District Court were also included, being covered by the general costs order in respect of those proceedings. 43 It seems that in November 2003, Mr Sarbutt heard that Ms Kardos was selling the Woonona property, and having consulted a solicitor lodged a caveat in respect of it on 24 November 2003. A letter from Ms Kardos' solicitor dated 3 December 2003 confirmed that she was selling the property and served a lapsing notice. On 23 December 2003, on Mr Sarbutt's application to the Supreme Court, Equity Division, the operation of the caveat was extended to 2 February 2004. On 30 January, Ms Kardos gave a written undertaking to the Equity Division that she would not transfer, mortgage, encumber or dispose of or deal with the Woonona property without first giving 28 days notice to Mr Sarbutt. It is unclear what ultimately became of the Supreme Court proceedings, and in particular whether an order was made that the costs of those proceedings be costs in the proceedings in the District Court, although the way in which her Honour dealt with the matter and the absence of apparent objection to that course suggests that that might be so. Subsequently, Ms Kardos gave notice of intention to dispose of the Woonona property and, Mr Sarbutt having commenced these proceedings in the District Court on 18 March 2004, sought and obtained interlocutory relief from the District Court. 44 The costs so incurred were additional to the ordinary costs of an application for property adjustment and were, on the primary judge's finding, reasonably incurred and necessitated by Ms Kardos' behaviour. As to these components of the costs, her Honour said: In terms of costs, I propose to order, subject to any argument of offers of compromise etc, that the defendant pay the plaintiff's costs, including the Supreme Court costs. In my view, given the circumstances of this case, and the defendant's behaviour after the separation, that it was reasonable and necessary for the plaintiff to seek to protect his interests, and that the proceedings in the Supreme Court for a caveat on the Woonona property were made necessary by the actions of the defendant.

45 As Ms Cohen has submitted, the notice of appeal did not challenge her Honour's finding or order in this respect. While, in this type of case, questions of costs of the substantive proceedings necessarily have to await the outcome of the appeal, the question of costs of the interlocutory proceedings did not depend on the outcome of the appeal generally, and should have been addressed, if they were to be addressed at all, on the hearing of the appeal. No issue about those costs was raised by the Notice of Appeal, nor by the written submissions or oral submissions on the hearing of the appeal. 46 Mr Alexander has, in reply, advanced submissions that Mr Sarbutt had no proper basis for lodging or requiring a caveat, and that the trial judge's criticism of Ms Kardos' behaviour was unfair. The caveat claimed an "equitable interest" by virtue of "financial contributions in respect of the property between November 1999 and November 2003". Thus it did not merely assert an interest arising under the Property (Relationships) Act, which would not have been a caveatable interest, but an equitable interest arising from financial contributions. The issue has not been fully argued, but Mr Sarbutt appears to have had a triable claim for such an interest, and I would not accept that it has been established that Mr Sarbutt had no caveatable interest. 47 The material before this Court does not permit a conclusion that the judge was in error in making the finding she did in respect of the reasonableness of the caveat and interlocutory proceedings. Accordingly, in distinction from the costs of the first instance proceedings generally, there is no basis for interfering with the orders of the primary judge with respect to the costs of the interlocutory proceedings, including the caveat proceedings in the Supreme Court.

The Costs of the Appeal 48 The considerations that support the view that no order for costs will often be appropriate at first instance, apply much less forcefully in the context of an appeal. An unsuccessful appeal will almost always justify a costs order following the event. And although the position is less clear cut in the case of a successful appeal, still it will often be appropriate to make a costs order following the event. One reason for this is that it is often easier to detect "substantial success" on an appeal. Appellate proceedings are not, as first instance proceedings are, an incident of the breakdown of the relationship without attributable fault. An appeal is a further proceeding, challenging by the inappropriate order made at trial, which an appellant is compelled to prosecute to achieve an ultimately just result, and in respect of which it was open to the respondent to make an offer of compromise if so advised.

49 For Mr Sarbutt, Ms Cohen submits that Ms Kardos should not be entitled to costs of the appeal.

50 First, it was submitted that many of the grounds of appeal did not succeed, and that whereas Ms Kardos sought orders setting aside the judgment at first instance and contended that there should be no order in favour of Mr Sarbutt, an order in his favour has stood, albeit reduced in quantum. Issues upon which Ms Kardos failed included the valuation of the Williamstown property, the evidence of the neighbours, and the credit issue; and while contending for an asset-by-asset analysis, she never offered one. However, while it is true that many of Ms Kardos' grounds of appeal failed, and that she did not achieve as complete success as she sought, ultimately she achieved a substantial measure of success in this court, reducing the order against her from $100,000 to $36,075. The hearing of the appeal occupied less than four hours. The grounds on which Ms Kardos failed did not add significantly to the costs of the appeal.

51 Secondly, it was submitted that substantial additional costs were incurred as a result of an initial failure to include relevant material in the appeal books, which ultimately required that supplementary appeal books be prepared. But, as Mr Alexander submits in reply, it is difficult to see how the original omission of material from the appeal books, apparently in the hope that the record might be minimised and costs saved, could have resulted in the incurring of substantial additional costs by Mr Sarbutt, especially when the supplementary books were prepared by Ms Kardos.

52 Thirdly, it was submitted that this court having reassessed the contributions of the parties, it would be unfair if Mr Sarbutt were to have to bear the costs of the reassessment, in circumstances where there were some issues raised in favour of Mr Sarbutt which were not the subject of the appeal, including notional rent and interest. It was said that the appeal was just another step in Mr Sarbutt's claim for an adjustive property order in circumstances where Ms Kardos always alleged that Mr Sarbutt was not entitled to any order. I do not accept this. 53 In my opinion, Ms Kardos substantially succeeded in the appeal, and the order that Mr Sarbutt pay her costs of the appeal should stand, together with the order that Mr Sarbutt receive a Suitors' Fund Act certificate.

General 54 On 13 April 2006, Mr Sarbutt's solicitors wrote to the Court, seeking, in effect, clarification of the time for payment pursuant to this Court's orders, and expressing a view that, in the absence of any time having been fixed, the time for payment was 28 days. Ms Kardos' solicitors replied, asserting that in the absence of any time for payment having been specified, no interest was payable.

55 It is a common misconception that an order or judgment for a monetary payment must specify a time for payment. The effect of Civil Procedure Act, s 107, and its predecessors, is that unless the court makes an order allowing for payment of the debt within a specified time or by instalments, a judgment debt is payable immediately. A judgment takes effect as of the date on which it is given or made [UCPR r 36.4; cf DCR Pt 31 r 13A(2)], although under Civil Procedure Act s 101 (cf District Court Act, s 39), interest is not payable on the amount of a judgment if the judgment is paid in full within 28 days after the date on which it takes effect, unless the court orders to the contrary. 56 When the Court of Appeal substitutes an order or judgment for a different amount to that of the court below, the substituted judgment is not a judgment of the Court of Appeal but is a judgment of the Court below, as if it had been given on the date when that court gave the judgment appealed from.

57 The order of this Court substituted an order for the previous order of the District Court, "with effect from 21 February 2005". The matter has not been argued, but prima facie the effect of the order made in this Court is that the District Court is to be taken as having made an order on 21 February 2005 that Ms Kardos pay Mr Sarbutt $36,075, and that if the amount was not paid in full within 28 days after 21 February 2005, interest runs from that date, and not from the date of this Court's judgment.

Conclusion 58 Under the Rules, the starting point is that Mr Sarbutt is not entitled to costs. Both parties determined how the proceedings were conducted, and in the absence of realistic offers of compromise both share responsibility for the costs of the proceedings. Neither party was more responsible than the other for the incurring of costs. Both were compelled to litigate: it was necessary from the perspective of both that their property interests be separated, and neither made an offer that was significantly more realistic than the other's. The proceedings, and therefore their costs, were an incident of the breakdown of the relationship. Given the context of the amount recovered and the competing forensic and negotiating positions of the parties, the overall justice of the case does not warrant a general costs order in respect of the first instance proceedings. Visiting the costs of a four-day trial on Ms Kardos would have a disproportionate impact on the overall justice and equity of the outcome. There is insufficient reason to depart from the starting point. There should be no order as to the costs of the proceedings at first instance (apart from the interlocutory and caveat proceedings), to the intent that each party bear his and her own costs.

59 There is no basis for disturbing the trial judge's decision that the costs of the interlocutory and caveat proceedings should be borne by Ms Kardos.

60 The order that Mr Sarbutt pay Ms Kardos' costs of the appeal to this court, in which she was substantially successful, should stand, together with the order that Mr Sarbutt have a certificate under the Suitors' Fund Act. 61 I propose the following orders:

1. Set aside order 2.2 made on 14 February 2006 and substitute: "That the defendant pay the plaintiff's costs of proceedings 13352 of 2003 in the Supreme Court, Equity Division and of the interlocutory proceedings in the District Court up to 1 April 2004, and that otherwise there be no order as to costs, to the intent that each party bear his and her own costs".
2. Dismiss the application to set aside and/or vary Orders 3 and 4 made on 14 February 2006.

62 The existing order that the respondent pay the appellant's costs of the appeal will cover the costs of the costs applications resolved by this judgment, in respect of which Ms Kardos has been substantially successful. **********

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