A & M - [2006] FamCA 861

FAMILY COURT OF AUSTRALIA

A & M

[2006] FamCA 861

FAMILY LAW – APPEAL – COSTS ON DISCONTINUANCE – INDEMNITY COSTS where appeal defective– where respondent agreed to pay costs on a party/party basis – where wife’s subsequent application for party/party costs later amended to seek indemnity costs – application for indemnity costs upon discontinuance dismissed.

Family Law Act 1975, s 117

Family Law Rules 2004, r 10.11, r 19.19, r 22.54

ZH v N [2005] FamCA 828

GA & VA [2005] FamCA 557

Albarran v Theodorou [2006] NSWSC 9

APPLICANT: JNA

RESPONDENT: RM

FILE NUMBER: CAF 1638 of 2002

APPEAL NUMBER: EA 111 of 2005

DATE DELIVERED: 10 July 2006

PLACE DELIVERED: Canberra

JUDGMENT OF: Bryant CJ, Kay & Boland JJ

HEARING DATE: 10 July 2006

COUNSEL FOR THE APPLICANT: Mr Howard
SOLICITORS FOR THE APPLICANT: Elrington Boardman Allport
COUNSEL FOR THE RESPONDENT: Mr Brzostowski

SOLICITORS FOR THE RESPONDENT: Farrar Gesini & Dunn

Orders

1.That the Respondent Father pay the Applicant Mother’s costs of the appeal filed 23 September 2005 from 23 September 2005 to 21 February 2006 in accordance with the family law scale of costs.
2.That the Applicant Mother pay the Respondent Father’s costs in relation to the Amended Application filed on 20 March 2006 in accordance with the family law scale of costs.
3.That each party shall serve on the other an itemised bill of costs within 21 days of these Orders.
4.That each party shall serve any objections to the itemised bill of costs on the other party within 14 days of being served with the bill of costs.
5.That if no agreement is reached as to the quantum of costs to be paid, then either or both parties shall file with the Registrar of this Court the bill of costs and any objections made by the other party and any responses to any objections.
6.That a Registrar of this Court cause a preliminary assessment (in accordance with r 19.29) to be made of the itemised Bill of Costs.
7.If the parties agree on the preliminary assessment then each party shall pay the amount assessed as soon as practicable thereafter and until payment of the total of the amount due interest on the outstanding balance from time to time calculated on monthly rests at the rate of 10.25% per annum.
8.If objection is taken to the preliminary assessment then the provisions of r 19.30 will apply and in due course of assessment in accordance with r 19.32 conducted in accordance with r 19.34 will apply.

BRYANT CJ:

The application before the Court is that of the respondent mother to an appeal brought by the father on 23 September 2005. The parties in this case were never married. The father discontinued the appeal and the mother seeks her costs on an indemnity basis.
The genesis of the proceedings is the mother's application filed in the Canberra Registry of the Family Court of Australia seeking parenting orders in relation to their child, an adjustment of property under the Domestic Relationships Act 1994 (ACT), which I will refer to as the "Domestic Relationships Act", and a departure from a child support assessment under the Child Support (Assessment) Act 1989 (Cth).
The father objected to the Court exercising jurisdiction under the Domestic Relationships Act and sought to have the proceedings transferred to the ACT Supreme Court. Subsequently, the father consented to the parenting orders sought by the mother but maintained his opposition to the departure application.
On 29 August 2005, Faulks DCJ heard the father's application objecting to the jurisdiction of the Family Court of Australia to hear and determine the mother's proceedings for property under the Domestic Relationships Act. He dismissed the father's application and the father appealed.
The appeal was listed before Finn J on 5 December 2005 for procedural directions, including the mother's application pursuant to s 96AA of the Family Law Act dismissing the appeal on the grounds of incompetence. The mother's outline of argument contended the appeal should be dismissed on three main bases, including the fact that there was no appeal permitted by the legislation in relation to an application to transfer proceedings from the Family Court to another court, which was the basis of his Honour's decision.
As a result of the matters raised by the mother in her summary of argument, the father was given an adjournment to consider his position. He subsequently filed a Notice of Discontinuance on 22 December 2005. It was not served until 8 March 2006 but, as I will indicate in a moment, it was clear from late December or early January that the father accepted that the appeal was incompetent and intended to discontinue the proceedings. The father changed solicitors, which might have added to the confusion following the filing of the notice. It is however common ground that by early January at least, the father had accepted that the appeal could not proceed.
The father accepted that the appeal could not proceed and accepted that he would be obliged to pay the mother's costs. He accepted the obligation to pay those costs on a party/party basis in accordance with the family law scale. Some confusion attends the correspondence between the parties about the costs, however, we have been taken to various documents which indicate the following:
(a)that on 10 January 2006 the father's solicitors wrote to the mother's solicitors confirming that they would prepare a withdrawal of the appeal, lodged by their client and would forward it.
(b)on 11 January 2006, the mother's solicitors wrote to the father's solicitors asking if they would agree to pay their client's costs of the appeal on an indemnity basis.
(c)on 25 January 2006 the father's solicitors, that is the new solicitors, wrote to the Registrar of the Court in Canberra, noting that it was their understanding that the appeal had already been discontinued and saying:
`The costs of the appeal will be dealt with in the usual way. The significance is that such costs are likely to be in accordance with the Family Court scale of costs and not on indemnity basis.’
(d)on 27 January 2006 the mother's solicitors wrote to the father's solicitors asking for a sealed copy of the Notice of Discontinuance and saying:
`Is your client willing to consent to an order paying our client's costs of the Appeal as agreed or as assessed by the Court? If not, please advise urgently when the Discontinuance was filed so that we may file an application for costs and we will also seek costs of this application.’
(It is noteworthy in my view that indemnity costs were not sought in that letter.)
(e)on 6 February 2006, the father's solicitors wrote to the mother's solicitors saying, inter alia:
`It is our understanding that the Appeal has already been withdrawn, although we do not have a copy of that Notice of Discontinuance. We refer you to our letter to the Family Court dated 25 January 2006 (a further copy is enclosed).’ [Footnotes omitted]
So on that date, namely 6 February 2006, the mother's solicitors were aware that the father was prepared to pay the costs in accordance with the scale.
(f)on 21 February 2006, there was a further letter written to the mother's solicitors by the father's solicitors saying, inter alia:-
`In any event, we confirm that our client accepts that costs are properly claimable by you in respect of the appeal. We note that this should be at the Family Court scale of costs rather than on an indemnity basis.’
(g)prior to that letter and on 8 February 2006, an application for costs was filed by the mother's solicitors. That application sought costs pursuant to r 22.54 and r 10.11(4) of the Family Law Rules 2004, as agreed or taxed in relation to the appellant's discontinuance of the appeal. Again, it is noteworthy that that application did not seek indemnity costs. So having filed the application on 8 February 2006, on 21 February 2006 further confirmation that costs would be paid but not on an indemnity basis was given in the letter to which I have referred.
On 20 March 2006 the mother filed an amended application in which she sought a number of orders, the basis of which is that she was then seeking costs on an indemnity basis. The father opposes that application and that is the matter which has proceeded before us today.
There is not, nor has there been from the correspondence to which I have referred, any dispute by the father that having discontinued the appeal he is liable to pay the mother's costs. The argument before the Court is whether or not those costs should be payable on an indemnity basis.
The basis upon which indemnity costs are payable are set out in a number of cases. They have been summarised by the Full Court in the matter of ZH & N [2005] FamCA 828 and I quote from paragraph 13 of the reasons for judgment in that matter:-
`In [R v Q] [2005] FamCA 6, an unreported judgment of the Full Court delivered on 6 January 2005, the Court considered the question of indemnity costs. In that case their Honours referred to the decision of the Full Court in JEL v DDF No 2 (2001) FLC 93-013 at 88,441-2, where the Full Court said:
The category of cases in which it would be appropriate to make an order for indemnity costs does not appear to have been fully defined. The Full Court has, however, set out some general principles.’
In ZH & N (supra), the Full Court went on to say (at paragraph 14):
`I do not intend to repeat the long quote from JEL v DDF that their Honours then referred to; suffice it to say that that case considers a number of authorities, including the well-known case of Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248, a number of Federal Court authorities, Family Court authorities, including Yunghanns v Yunghanns (2000) FLC 93-029 where again the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order not being closed. At page 87,471 the court in Yunghanns said as follows:
It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the court asked to exercise the discretion be satisfied that some particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party-party basis (per Sheppard v Day and Colgate Palmolive Co v Cussons Pty Ltd).’
The Family Law Rules 2004 deal with the question of party/party or indemnity costs in chapter 19. Discontinuance of an appeal is dealt with by r 22.54 and is to be treated as if it were an Application in a Case. Rule 10.11(4) provides that if a party discontinues a case, another party may apply for costs within 28 days thereafter, or after the Notice of Discontinuance is filed. Rule 19.08 provides that a party may apply for an order other than party/party costs.
Rule 19.19(1) provides that the Court may order that rule 19.18 does not apply and that a party is entitled to costs:
`(a) of a specific amount;
(b) as assessed on a lawyer and client basis or an indemnity basis;
(c) to be calculated in accordance with the method stated in the order; or
(d) for part of the case, or part of an amount, assessed in accordance with Schedule 3.’
That gives the Court considerable discretion as to the amount of costs to be ordered in a particular case.
In addition to the authorities to which I have referred, r 19.19(2) gives some further guidance. It says:
`In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party's behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer's conduct has been improper or unreasonable;
(e) the time properly spent on the case; and
(f) the expenses properly paid or payable.’
It is common ground in this case that the father was not aware of the hopelessness of the appeal when it was lodged. It is conceded by the mother's counsel that it was not recognised immediately by the mother's counsel as well that the appeal was hopeless, and it was not until shortly before the matter was mentioned before Finn J that it became apparent to the mother's solicitors that there was no basis on which the appeal could proceed. Both parties, therefore, bear some responsibility for not being aware of the law. Both parties were represented.
We were referred to several authorities by Mr Brzostowski for the mother. He referred us to ZH & N (supra), the authority to which I have referred. In my view, that case is quite distinguishable from the present. In ZH & N (supra), the appellant had filed a Notice of Appeal raising questions of constitutionality of provisions in the Family Law Rules 2004, and subsequently withdrew that application. There was no suggestion that that matter may not have been ultimately found to be correct on appeal if the proceedings had been subsequently litigated. It was simply the case that, the appellant having raised those issues and the other party being put to expense, the appellant then chose not to proceed with an application which no-one had said was not reasonably arguable. This case is of an entirely different nature.
Similarly, in my view, the facts in GA & VA [2005] FamCA 557 to which we were also referred are not pertinent and the comments in the recent decision of the New South Wales Supreme Court, Equity Division in Albarran v Theodorou [2006] NSWSC 9 do not, in my view, assist the applicant. All that is said in that case is that requiring proceedings to begin when there is no basis upon which those proceedings could be opposed is one circumstance in which an indemnity costs order can be granted. The matter remains within our discretion and there are a number of factors in this case to which we must have regard.
The appeal was lodged and it is conceded that the appeal could never have succeeded. Had the mother's solicitors been aware of the incompetence of the appeal, no doubt they could have brought it to the attention of the father's solicitors at an early stage and virtually all the costs could have been avoided. Unfortunately, they did not realise until shortly before the matter came on before Finn J that the appeal was incompetent. That meant that almost as soon as it was raised by them, the father accepted that the appeal was incompetent and took steps to discontinue it. He discontinued it formally be filing a Notice of Discontinuance in December 2005 and by early January 2006 his new solicitors had notified the mother's solicitors of the Notice of Discontinuance and of his acceptance that costs would have to be paid. Even at that stage, the costs would, in my view, have been reasonably modest. It seems that in this case, somewhat extraordinarily, the majority of the costs will have been incurred in arguing about whether or not there should be an order for indemnity costs. The likelihood is that the costs of that argument will outweigh the costs that were originally incurred.
The case is not, in my view, one which raised important or complex or difficult issues. The issue was quite straightforward, had the law been apparent to each of the party's lawyers. Each of their lawyers, to some extent, contributed to the matter proceeding as far as it did. However, the father sought to minimise the cost of the appeal by discontinuing the proceedings as soon as this had been brought to his attention and acknowledged his obligation to pay costs, at least on a party/party basis. For those reasons, in my view, this is not a case in which the Court should exercise its discretion to award indemnity costs and costs should be payable on a party/party basis.
The father has made an application during the course of the proceedings to us that, in the event that the mother is not successful in her application for indemnity costs, she should bear his costs in relation to that application. The application for costs was amended on 20 March 2006 to seek indemnity costs and no argument was advanced to us by the mother as to why she should not be responsible for the costs after that date in the event that the Court was to find that the application for indemnity costs was unsuccessful. In my view therefore, the father should be entitled to an order for his costs as from 20 March 2006.
The orders that I would therefore make in this case would be as follows
1.That the Respondent Father pay the Applicant Mother’s costs of the appeal filed 23 September 2005 from 23 September 2005 to 21 February 2006 in accordance with the family law scale of costs.
2.That the Applicant Mother pay the Respondent Father’s costs in relation to the Amended Application filed on 20 March 2006 in accordance with the family law scale of costs.
3.That each party shall serve on the other an itemised bill of costs within 21 days of these Orders.
4.That each party shall serve any objections to the itemised bill of costs on the other party within 14 days of being served with the bill of costs.
5.That if no agreement is reached as to the quantum of costs to be paid, then either or both parties shall file with the Registrar of this Court the bill of costs and any objections made by the other party and any responses to any objections.
6.That a Registrar of this Court cause a preliminary assessment (in accordance with r 19.29) to be made of the itemised Bill of Costs.
7.If the parties agree on the preliminary assessment then each party shall pay the amount assessed as soon as practicable thereafter and until payment of the total of the amount due interest on the outstanding balance from time to time calculated on monthly rests at the rate of 10.25% per annum.
8.If objection is taken to the preliminary assessment then the provisions of r 19.30 will apply and in due course of assessment in accordance with r 19.32 conducted in accordance with r 19.34 will apply.

KAY J:

I agree. I have nothing to add.

BOLAND J:

I agree with the reasons for judgment of the Chief Justice, and the orders. I have nothing to add.

I certify that the preceding
23 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.

Associate