Messias v de Barros

District Court of NSW|2013-06-11|Before: Mr J

ex tempore Judgment 1I recently gave judgment in favour of Nailse Messias in the sum of $90,000. Ms Messias seeks an order for costs, with those costs to be assessed on an indemnity basis from 5 August 2011. 2As an alternative, Ms Messias seeks that the indemnity nature of the costs order commence on 11 April 2011 or, alternatively, that 95 per cent of indemnity costs be ordered. 3Mr de Barros accepts that Ms Messias is entitled to an order for costs but opposes all of the orders sought. He submits that Ms Messias should get 33 per cent of the costs assessed on the usual basis and, in an alternative submission that was made towards the conclusion of submissions, on the basis that the costs should not exceed the amount of the judgment made in favour of Ms Messias.

Basis of respective positions 4Ms Messias asks for a special costs order because of the conduct of Mr de Barros in the proceedings. It is not in contest that Mr de Barros was in default of directions on a number of occasions and that additional costs were incurred by reason of these defaults. Mr de Barros submits that already three costs orders have been made against him and thus his defaults have already been the subject of costs orders. 5Mr de Barros submits that Ms Messias claimed an amount of $250,000 and, ignoring interest, the amount received amounted to about 33 per cent of the claim. He submitted that the costs order should be equated to the degree of success on the claim. 6He also submitted that this was a case where there was over-servicing and that valuations of these properties were unnecessary because the defendant had disclosed sufficient assets to meet any judgment that Ms Messias was likely to obtain.

Analysis 7Both parties accept that the starting point is that costs follow the event, as provided in Uniform Civil Procedure Rule 42.1. As I said in Everett v Neale [2012] NSWDC 83 at [8]: "Costs orders, even indemnity costs orders, are for the purpose of compensating the successful party for the costs of the proceedings, not for the purpose of punishing the unsuccessful party: see Oshlack v Richmond River Council [1998] HCA 11 at [24]-[25]."

A "relevant delinquency" by Mr de Barros 8In Oshlack v Richmond River Council [1998] HCA 11, the High Court recognised that if a particular case involved a "relevant delinquency" by the unsuccessful party, it may justify costs being awarded on an indemnity basis. That principle finds additional support in the provisions in ss 56 and 57 of the Civil Procedure Act 2005. 9In Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan & Ors) [2009] NSWCA 161 at [100] and [101], the Court of Appeal stated: "Section 56 of the Civil Procedure Act now adds emphasis to occasion to depart from costs on the ordinary basis where failure properly to conduct the proceedings had caused costs to be incurred unnecessarily. But it does not override the need for a rational connection between the reason for departure and the extent of the departure. [101] There may no doubt be cases in which the effect of the misconduct is so pervasive that, in a proper exercise of the general discretion, the higher level of reimbursement can extend to the entire costs of the proceedings. That is perhaps the explanation for Adelaide Congregation Jehovah's Witnesses Inc v Pegasus Leasing Ltd (Olsson J, SASC, 24 December 1996, unreported), where the defence was described as unrealistic and uncompromising as to all issues and leading to a very protracted trial. It is necessary to remember that the trial judge was exercising a discretion, and a discretion in relation to costs as to which this court is particularly cautious in its intervention; a trial judge is in an advantageous position in arriving at the just disposition of costs. However, the trial judge did not express a pervasive effect of the Council's conduct of which he was critical, or say that the Council acted unreasonably in defending at all." 10There are a number of delinquencies identified by Ms Messias in the conduct of the defendant. First, the repeated failure of the defendant to comply with directions relating to the valuation of the Florianopolis property. As this was a foreign property, assessing its value in a manner admissible in court proceedings raises some difficulties and these difficulties were exacerbated by the failure of Mr de Barros to comply with orders to enable access and other orders to progress the valuation procedure. 11Ultimately, access was obtained shortly before the hearing but the valuation was not translated into English, so it was of limited assistance. This problem of the valuation of the Florianopolis property was resolved part way through the trial when the parties agreed to compromise their respective positions to reach an agreed value. 12Secondly, Mr de Barros continually refused access to his property at Consett Avenue, Bondi. A valuation was ultimately provided by a local valuer, without an inspection of the internal area and that value, again during the trial, was accepted by the parties to be the agreed value. 13Thirdly, the defendant, Mr de Barros, did not disclose his interest in a third property in Ramsgate Avenue, Bondi until Ms Messias raised it. 14Fourthly, Mr de Barros disregarded repeated directions regarding the disclosure of his financial position. He refrained from serving a statement disclosing his financial position prior to trial. At a mediation, approximately 12 months prior to trial, Mr de Barros allowed Ms Messias to view a copy of a statement of his financial position, but this statement was not served and was in any event false. 15A further statement was served during the trial, which was also shown to be false as it understated his assets to a substantial degree. 16It seemed to me that Mr de Barros' conduct in respect of the disclosure of his financial position was inadequate, done in disregard of directions, deliberate and apparently contemptuous of this Court and its directions. 17Even during his evidence he was unwilling to provide a statement of his bank deposit funds, unless specifically directed by this Court, overlooking that the Court had previously directed him on several occasions to provide a statement of his financial circumstances. 18Fifthly, Mr de Barros did not give adequate discovery and that which he did discover in some respects he failed to provide for inspection when requested. Details of bank deposit assets were only obtained by the use of subpoenas. 19Sixthly, Mr de Barros did not file any affidavit in the proceedings prior to trial. His failure to do so ultimately led to a direction being made shortly before trial by another judge of the Court precluding him from filing further evidence. On an application made by him part way through the trial, I allowed an affidavit by him to be read. Delayed filing of this affidavit was another grave failure to abide by court directions. 20Seventhly, the failure of Mr de Barros to disclose his financial position made a good faith mediation impossible as Ms Messias was in no position to properly assess the value of her own claim against the assets of Mr de Barros. 21None of these matters seem to be genuinely disputed. Together they represent an attitude of defiance towards the court process, which must have had a substantial adverse impact on the level of costs incurred. 22The failure of a party to disclose their financial position is significant. Not only was it in breach of directions, but it was also in breach of obligations implicit in the Property (Relationships) Act 1984. McLaughlin M in Parks v Thompson [1997] DFC 95 - 182 at 77,579 stated: "It can not be emphasised too strongly that in proceedings under the De Facto Relationships Act, each party bears a responsibility to place before the Court full and complete information concerning the financial and material circumstances, including the assets and liabilities, of that party at the commencement of the relationship, at the termination of the relationship and at the time of the trial. In the instant case the defendant appears deliberately to have chosen not to fulfil his obligations in this regard". 23In my view, these matters amounted to a "relevant delinquency" and warrant an indemnity costs order. I shall deal subsequently with the period such an order should cover. 24There are two other matters in my view that support an indemnity costs order in this case. The first, I have earlier made brief reference to and that is that s 56 of the Civil Procedure Act 2005 recognises the important duty on a party to assist the Court in the just, cheap and quick resolution of the proceedings. A failure by a party to abide by this duty does, as indicated in the Liverpool City Council decision referred to earlier, impact upon an entitlement of the instant party to a special order for costs. 25As stated by her Honour Ward J in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [83], quoting Allsop P in Bi v Mourad [2010] NSWCA 17 at [47]: "...it is through the keen recognition of the conduct of the courts, in particular in the 20th century, of the need to deal with cases expeditiously if they are to be dealt with justly. Delay and case backlog are not merely factors affecting the costs of delivering justice; they corrode the ability of the courts to provide individual justice." 26This passage has particular application to these proceedings. Mr de Barros, after disregarding directions to file evidence, sought to put on further evidence part way through the trial. This necessarily raised difficulties in the evidence being appropriately tested. It has inevitably caused Ms Messias to seek other avenues to obtain evidence and prove matters that were apparently not to be the subject of contesting evidence by Mr de Barros. 27Secondly, my assessment of the amount the plaintiff should receive from the assets of the parties would be affected by the order I make for costs. 28In Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [13], the Court said: "...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". 29In my view, the overall justice of the decision I gave in favour of the plaintiff in the sum of $90,000 would be adversely impacted if my order were to be substantially diminished by the impact of a costs order. 30Of course, if the defendant had served a relevant offer of compromise, it would be inevitable that the amount Ms Messias would receive would be adversely affected by unrecoverable costs. But the parties here accepted that there was no relevant offer of compromise.

Ms Messias' level of success 31I do not accept that Ms Messias' level of success in the proceedings warrants a reduction to the level of costs she should receive. This was not a case that could have been commenced in the Local Court. The jurisdiction of that court at the time of commencement of the proceedings was less than half the amount awarded to Ms Messias. 32In this regard I refer to the decision of Van Zonneveld v Seaton [2005] NSWSC 175 which is discussed later in these reasons. 33Mr de Barros relied on Baker v Towle [2008] NSWCA 73 at [8] and [9] as authority for the principle that the percentage of costs awarded should equate to the percentage that the sum awarded bore to the amount claimed. In that case there was no appeal from the decision of that approach adopted by the trial judge (see [8]) and the Court of Appeal at [9] expressly disclaimed that this was a "usual rule". 34Further, speaking of this decision, in Separovich v Ferrao (No 2) [2011] NSWCA 346 at [13] and [14], the Court of Appeal stated (per Beazley JA): "[13] In agreeing that the Associate Judge's order was appropriate in that case, I expressed the view that such approach did not involve a 'usual rule' that an award of costs in applications under the Property (Relationships) Act should reflect the proportion of interests in property as adjusted by the court. As I stated, at [9], the discretion conferred by UCPR, r 42.1 was not fettered in that way. See Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72, especially at [21]-[22] and [35]...[other authorities omitted] which establish that it is inappropriate to confine the discretion conferred by the Civil Procedure Act, s 98 and UCPR, r 42.1. [14] Basten JA, obiter, raised the question as to what constituted 'the event' for the purposes of the rule in r 42.1 that 'costs follow the event'. I was of the opinion that that was not an issue that required ventilation in that case. For my part, I considered that the real question was what was the appropriate order for costs in the case at hand. In that regard, I noted that an obvious starting point in the determination of that question was the pleadings, but that was likely to be only one of several considerations relevant to determining whether an order, other than that costs follow the event, should be made and if so, what order ought to be made. Other considerations might include whether any offers of settlement had been made and, if so, what those offers were. Another discretionary consideration might be the manner in which the proceedings were conducted. As I indicated, at [23], those were but two specific examples within a possible range of relevant circumstances depending upon the particular case." 35I emphasise the reference in that passage to "the manner in which the proceedings were conducted" as a relevant matter. I have referred already to the manner in which Mr de Barros conducted the proceedings. 36Further, Ms Messias' case was largely accepted: in respect of the assets of the parties, the contributions, the length, starting and end date of the relationship. She failed only in that in submissions made on her behalf she sought to attribute a greater value to her level of contribution than I placed upon it. She also gave evidence that certain moneys had been repaid by her, but ultimately this was not part of the case she pressed upon the Court. 37In Deves v Porter [2003] NSWSC 878, Campbell J applied what was termed a rule of thumb that costs be capped at the level of compensation ordered in favour of a plaintiff. A similar question arose in Van Zonneveld, where a de facto husband in that case received an adjustment of $51,000 in a claim for in excess of $600,000. I note that in that case there was no proposal to award a proportion of costs. However, his Honour did consider the "rule of thumb" but decided to cap the costs at $100,000, approximately twice the value of the claim, emphasising that the defendant could have made an offer of compromise that would have provided some protection and that any rule of thumb was not "a substitute for the exercise of a discretion, bearing in mind all facts of a particular case" (see Kardos at [22]). 38I have been told that the plaintiff's costs in this matter are in the order of $180,000. If that is so, a cap similar to that applied in Van Zonneveld would have no real impact. In any event, because of the defaults of Mr de Barros in the course of these proceedings, I do not think a cap is appropriate. 39It may be that in the usual case spending $180,000 on a case resulting in a judgment of $90,000 is at the outer end of an appropriate level of costs. But this has little application in this case where the defendant has, by his delinquent conduct, been largely responsible for the high level of costs. This is in no sense a usual case.

Over-servicing 40The defendant submitted that the plaintiff's case contained overservicing. It may be true that, as I indicated earlier, there was a relatively large amount apparently spent on costs relative to the amount of the judgment. However, there was no evidence before me to establish a case of over-servicing. Certainly costs could have been avoided in the preparation of this case, but that depended upon the defendant abiding by directions and frankly and promptly disclosing his financial position. He refrained from so doing to the very end. 41For that reason, I do not see that there is any substance in the submission regarding over-servicing.

Timing of special costs order 42The Liverpool City Council decision indicates that there is a need in awarding indemnity costs orders to consider what impact the conduct of the defendant had on the costs incurred by the plaintiff. The difficulty in this case is that the impact is likely to have been pervasive in respect of the plaintiff's preparation for trial. The major issue at trial, which would have consumed the bulk of the pre-trial costs, was Ms Messias' attempts to ascertain the defendant's financial position. 43In my view, rather than attempt to attribute the various defaults of the defendant to particular costs incurred by the plaintiff, I have determined to award indemnity costs from and including the mediation on 11 April 2012. 44At that date the defendant had been in default of other matters, including assisting with the valuation of the Florianopolis property, but to my mind it was more important that the defendant had not provided a statement of his financial circumstances as directed. 45It is obvious that a good faith mediation has a real prospect of resolving many of the litigious matters in the community. Although one cannot be confident that a mediation in this case, even with full disclosure, would have resolved the proceedings, Mr de Barros' conduct nevertheless precluded the mediation from being conducted in the way intended. To be of utility the parties needed to disclose their financial positions prior to the mediation. Directions were made to that effect. The conduct of Mr de Barros meant that the mediation, and settlement attempts generally, could not be conducted on a sound footing. 46The consistent failure to truthfully disclose his financial position thereafter impacted on the costs that the plaintiff needed to incur to attempt to ascertain and prove the nature and value of the defendant's assets. 47By awarding indemnity costs from the date of the mediation I am attempting to connect the conduct of the defendant with the costs that the plaintiff was obliged to incur thereafter. I accept that Ms Messias may have incurred costs thereafter in any event, some of which ordinarily may have been unrecoverable. But conversely, she may have avoided certain unrecoverable costs beforehand had the defendant complied with directions. 48Accordingly, the costs order shall be that the defendant pay the plaintiff's costs, those costs to be assessed on an indemnity basis from and including 11 April 2012.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 August 2013

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