Key Takeaways
- No Costs Order Made: The Court ruled that neither party was wholly unsuccessful, and each should bear their own costs under section 117 of the Family Law Act.
- Out-of-Time Application: Mr Ongaro’s costs application was filed late, and the Court found no sufficient reason to extend the deadline.
- Settlement Offer Rejection Was Reasonable: The Court held that the respondent’s rejection of the applicant’s offer was justified due to valuation uncertainties and timing.
- No Litigation Misconduct: Both parties were found to have acted appropriately during proceedings, with no misconduct warranting a costs order.
- Third-Party Claim Rejected: A claim by the respondent regarding a debt to their daughter was not substantiated and did not affect the costs outcome.
Introduction
The case of Ongaro & Abadzhiev (No 2) [2024] FedCFamC1F 878 before the Federal Circuit and Family Court of Australia (Division 1) centred on an application for costs following a final hearing in a complex family law property dispute. The applicant, Mr Ongaro, sought an order for costs against the respondent, Ms Abadzhiev, arguing that he was successful in the substantive proceedings and that the respondent had acted unreasonably in rejecting a settlement offer. The Court considered whether an order for costs was appropriate under section 117 of the Family Law Act 1975 (Cth), determining that no such order should be made.
Background
The dispute between the parties involved significant financial interests, including the Abadzhiev Family Trust, which held a 25% stake in the N Unit Trust, owner of real estate in City LL. Another key issue was the Super Fund 5 pension, which was in the payment phase and subject to debate over whether it should be classified as an asset or a financial resource. Both parties incurred substantial legal and accounting costs throughout the proceedings.
On 27 September 2024, in Ongaro & Abadzhiev [2024] FedCFamC1F 653, the Court ruled on a 52/48 property split in favour of Ms Abadzhiev, requiring her to pay Mr Ongaro $708,929. However, valuation disputes over trust assets and superannuation classification added complexity to the outcome.
Mr Ongaro subsequently applied for a costs order, arguing that he was successful, and that the respondent had unreasonably rejected a reasonable settlement offer. He claimed the respondent’s legal positions on key issues were weak and did not justify litigation costs.
Ms Abadzhiev opposed the costs application, contending that neither party was successful, and her rejection of the settlement offer was justified due to valuation uncertainties at the time. She also asserted that the costs application was filed outside the 28-day deadline, making it procedurally defective.
Key Legal Issues and Questions for the Court
Application of Section 117 of theFamily Law Act 1975 (Cth): Assessing whether the general principle that each party should bear their own costs should be overridden due to the circumstances of the case.
Success of the Parties in Litigation: Determining whether either party was wholly or substantially unsuccessful in the substantive proceedings, thereby justifying a costs order in favour of the other.
Reasonableness of Settlement Offer Rejection: Evaluating if the respondent’s rejection of the applicant’s settlement offer was unreasonable given available financial and valuation evidence.
Timeliness of the Costs Application: Considering whether the applicant’s costs application was filed within the required 28-day period under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 or whether an extension of time should be granted.
Basis for a Costs Order: Determining whether a costs order, if made, should be assessed on an indemnity basis or a party-party basis.
Treatment of Third-Party Financial Claims: Assessing the validity of the respondent’s claim that $115,190 was owed to the parties’ adult daughter and whether this affected the overall costs assessment.
Case Authorities and Cited Precedents
The Court examined various precedents regarding costs orders in family law matters, including:
- Goold v Commonwealth of Australia; Rootsey v Commonwealth of Australia [1993] FCA 157; (1993) 114 ALR 135 – Established that genuine offers to settle should be considered in cost applications. The Court used this precedent to evaluate whether the respondent’s rejection of the applicant’s settlement offer was reasonable.
Link: Full Case
- Murray & Murray (1990) FLC 92-173 – Confirmed that a party’s success in litigation does not automatically entitle them to a costs order. The Court applied this principle to assess whether Mr Ongaro’s partial success justified a costs award.
- Ongaro & Abadzhiev [2024] FedCFamC1F 653 – This was the primary judgment in the substantive proceedings, determining the division of property and financial responsibilities between the parties, which formed the basis for the costs application.
Link: Full Case
- Robinson & Higginbotham [1991] FamCA 4; (1991) FLC 92-209 – Addressed the significance of offers of settlement in determining cost orders. The Court used this precedent to examine whether the respondent acted unreasonably in rejecting settlement proposals.
Link: Full Case
- Roydon & Roydon [2024] FedCFamC1A 105; (2024) FLC 94-194 – Reinforced that cost orders should only be made where one party has acted unreasonably. The Court considered this principle in deciding that neither party was unsuccessful, supporting its decision to dismiss the costs application.
Link: Full Case
Court’s Findings
- Neither Party Was Wholly Unsuccessful: The Court found that both parties had arguable positions, and while the applicant succeeded on some issues, the respondent was successful. The overall division of 52/48 was not significantly different from what the respondent had proposed in settlement discussions.
- Timeliness of the Costs Application: The Court determined that Mr Ongaro’s application for costs was filed outside the required 28-day timeframe under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021. While there was an argument for an extension, the Court found no compelling reason to allow an out-of-time application.
- Reasonableness of the Settlement Offer Rejection: The Court concluded that the respondent had legitimate reasons for rejecting the applicant’s 5 October 2023 offer, particularly given unresolved valuation issues. The offer was open for only 14 days, which the Court found insufficient for proper consideration. Furthermore, the final trial outcome was not significantly different from the respondent’s negotiation position.
- Conduct of the Parties: The Court found that both parties conducted themselves appropriately during litigation, with no evidence of misconduct warranting a costs order.
- Treatment of Third-Party Claims: The respondent argued that $115,190 was owed to the parties’ adult daughter, which the applicant disputed. The Court determined that this claim was unsubstantiated and should not be treated as a liability against the joint asset pool, but it did not justify awarding costs against the respondent.
- The Role of the Applicant’s Legal Costs: Mr Ongaro sought legal costs of $134,926, including solicitor, counsel, and expert fees. The Court noted that both parties had incurred significant legal expenses and that such costs were common in complex property disputes.
- Final Determination: The Court dismissed the applicant’s costs application, ruling that no order for costs should be made under section 117(2A) of the Family Law Act 1975 (Cth). The rejection of the settlement offer was deemed reasonable, and neither party was entirely unsuccessful. The respondent’s counter-application for costs was also dismissed.
Legal Implications and Precedent Summary
This case reinforces key principles in family law cost applications, affirming that the default position under section 117 of the Family Law Act 1975 (Cth) is that each party bears their own costs. It highlights that a party is not automatically entitled to costs simply because they were successful on some issues. The decision also underscores the importance of assessing the reasonableness of rejecting a settlement offer based on the circumstances at the time. Furthermore, it serves as a reminder that applications for costs must be filed within the required timeframe, or a compelling reason must be provided for an extension. Additionally, it emphasizes the necessity of substantiating third-party financial claims with evidence to impact cost determinations.
Keywords
- Family law
- Costs application
- Property settlement
- Federal Circuit and Family Court of Australia
- Litigation costs
- Settlement offers
- Financial resources
- Section 117 Family Law Act
Conclusion and Call to Action
The decision in Ongaro & Abadzhiev (No 2) [2024] FedCFamC1F 878 highlights the challenges of seeking costs orders in family law disputes, reinforcing that courts are reluctant to depart from the general rule that each party bears their own costs unless compelling reasons exist. This case emphasizes the importance of evaluating settlement offers in context, adhering to procedural timelines, and providing clear evidence for cost claims. It also serves as a reminder that third-party financial claims must be substantiated to influence cost determinations.
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