Adamo & Vinci (No 5)
[2024] FedCFamC1F 172
•22 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Adamo & Vinci (No 5) [2024] FedCFamC1F 172
File number: SYC 3598 of 2018 Judgment of: SCHONELL J Date of judgment: 22 March 2024 Catchwords: FAMILY LAW – COSTS – Where the husband’s application to set aside and vary final orders was dismissed – Where the wife sought indemnity costs against the husband – Consideration of factors under s 117(2A) of the Family Law Act 1975 (Cth) – Where the husband was wholly unsuccessful in the proceedings – Where the wife had a superior financial position to the husband – Where the husband’s offer to the wife did not represent an offer of settlement – Where the Court is not satisfied there are exceptional circumstances warranting indemnity costs – Costs ordered on a party and party basis. Legislation: Family Law Act 1975 (Cth), s 117 Cases cited: Adamo & Vinci (No 4) [2023] FedCFamC1F 1100
Colgate Palmolive Company & Anor v Cusson Pty Ltd (1993) 118 ALR 248
Kohan & Kohan (1993) FLC 92-340
Leichhardt Municipal Council v Green [2004] NSWCA 341
Nada v Nettle (Costs) (2014) FLC 93-612
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Penfold and Penfold (1980) 144 CLR 311
Westbury Holdings Kiama Pty Ltd v ASIC [2007] NSWSC 1064
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029
Division: Division 1 First Instance Date of last submissions: 20 February 2024 Date of hearing: Dealt with on the papers Place: Sydney Number of paragraphs: 29 The Applicant: Litigant in person Counsel for the Respondent: Mr Livingstone Solicitor for the Respondent: Alidenes & Co Solicitor ORDERS
SYC 3598 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR ADAMO
Applicant
AND: MS VINCI
Respondent
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
22 MARCH 2024
THE COURT ORDERS THAT:
1.The husband pay the wife’s costs on a party and party basis as agreed or assessed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
On 18 December 2023, the Court dismissed the applicant husband’s (“husband”) Further Amended Initiating Application filed 5 December 2022, that sought to set aside and vary final parenting and financial orders made following a contested hearing before Justice Rees.
Following the making of the Orders, the respondent wife (“wife”) sought an order the husband pay her costs in the amount of $87,271.21, or such other amount as the Court deems fit. It is apparent from an affidavit in support of the wife’s application that $87,271.21 represents the wife’s costs on an indemnity basis. The wife’s application is opposed by the husband.
Directions were made for the parties to file written submissions, with the matter to be determined on the papers. The wife’s application for costs needs to be seen within the context of the Reasons for Judgment delivered on 18 December 2023, published as Adamo & Vinci (No 4) [2023] FedCFamC1F 1100 (“Reasons for Judgment”). For the purposes of determining the wife’s application, I have read the wife’s affidavit, the written submissions of the wife filed 31 January 2024 and 20 February 2024, and of the husband filed 14 February 2024, and had regard to the factual history and findings made in my Reasons for Judgment.
An application for costs is governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”), which provides a general rule that each party to the proceedings should bear their own costs.
Section 117(2) of the Act reposes in the Court a discretion to make a costs order if the Court determines there are circumstances that justify this and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A) of the Act.
In Penfold and Penfold (1980) 144 CLR 311 at 315, the plurality in the High Court determined that to make an order under s 117(2) of the Act, the Court needs to make a finding of “justifying circumstances” as a preliminary prerequisite to the making of an order. Their Honours also observed that a term such as “a clear case” is not necessarily a determiner of whether an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
It is well-settled law that no one factor in s 117(2A) is determinative, and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 at 130, the Full Court observed:
41. … Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
The written submissions addressed what each of the parties regarded to be the relevant sub‑sections under s 117(2A) of the Act. I propose to deal with them in the order in which they are presented in the written submissions.
(a) The financial circumstances of each party to the proceedings
The wife submitted that the husband is a professional and capable of gainful employment, and referenced the Reasons for Judgment of Justice Rees. I accept the husband’s written submissions that the wife is in a stronger financial position, and I also accept his submission that there is no evidence that his earning capacity is greater than he contends. I do not accept, however, the husband’s submission that the wife’s actions, as referenced in his affidavit, means that he must continue, in the future, to pay rent and cannot afford to meet a costs order. I did not make such a finding in my Reasons for Judgment and there is no further evidence adduced that calls for its reconsideration.
Notwithstanding the wife’s superior financial position, impecuniosity is not a bar to the making of a costs order (Nada v Nettle (Costs) (2014) FLC 93-612).
(c) The conduct of the parties to the proceedings
The wife contended that the husband adopted a combative approach throughout the litigation and sought to rely upon an exhibit comprising some 1,800 pages. She also asserted that the husband, as a professional, should have been aware of various ethical obligations which he failed to adhere to. She further submitted that the proceedings he commenced and maintained were entirely misconceived, and he engaged in systems abuse by bringing the application.
I do not accept the wife’s submissions. I did not make a finding that the husband was combative, engaged in systems abuse, conducted himself other than ethically, or that the proceedings were misconceived. There is no fresh evidence adduced that permits a reconsideration of these assertions.
The above-mentioned exhibit tendered by the husband was admitted without objection by the wife. I further note that I made clear to the husband that, given its size, if he wanted to rely upon a document in it, he needed to make specific reference to it in his submissions. Whilst the exhibit itself was large, much of it was not the subject of any submission. Whilst I ultimately found against the husband I am satisfied that, on the whole, the husband conducted the litigation courteously.
I do not accept any of the husband’s submissions including that the wife engaged in “playing the Family Law system by using the children as pawns” and that the wife “manufacture[d] a defence to the Husband’s grounds under section 79A(1)(c) and (d)” (Husband’s Submissions on the Question of Costs filed 14 February 2024, paragraph 12). As with the wife’s submissions, there is no fresh evidence adduced that permits a reconsideration of these assertions by the husband.
I am not satisfied that there is any matter of conduct relevant to the making of a costs order.
I will address the submissions the husband made as to an offer of settlement when I come to consider s 117(2A)(f) of the Act.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings
I note the husband’s concession that he has been wholly unsuccessful in the proceedings, albeit that he contended an order for costs should not be made (Husband’s Submissions on the Question of Costs filed 14 February 2024, paragraph 13).
(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer
The wife contended that no relevant offers were made by the husband. The husband rejected the wife’s submissions, and referenced an offer of settlement made by him on 19 October 2021. I am not satisfied that the husband’s offer, made on that occasion, represented an offer of settlement. His letter of 19 October 2021 contained the following proposition:
I therefore request that you seek instructions from your client as to whether she accepts my offer that the current orders sought in my s79A application filed 16 April 2021 be made by consent of the parties, on the basis that Orders 14 and 15 of the orders made by Justice Rees on 16 October 2020 be varied as sought.
(Husband’s Submissions on the Question of Costs filed 14 February 2024, p 10)
I am not satisfied that there is any element of compromise in such a proposal. Rather, it is an invitation to the wife to surrender (see Westbury Holdings Kiama Pty Ltd v ASIC [2007] NSWSC 1064, Leichhardt Municipal Council v Green [2004] NSWCA 341).
I have not had regard to the husband’s offer to settle the application for costs.
(g) Any other matter the court considers relevant
I am satisfied that the only relevant consideration in the wife’s costs application is, as the husband properly concedes, that he has been wholly unsuccessful.
The wife’s application seeks costs on an indemnity basis or, in the alternative, in such other amount as the Court deems appropriate. I will turn to consider whether an order for indemnity costs should be made.
The authorities make plain that an order for indemnity costs is not one that is lightly made, and there should be circumstances of an exceptional kind that warrant orders for costs on an indemnity basis. In Kohan & Kohan (1993) FLC 92-340, their Honours in the Full Court observed at 79,614:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r. 2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v. Wright (No.2) “(supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR at 368 to 370.
Indemnity costs orders are still an exception in this and other jurisdictions. …
Justice Sheppard in Colgate Palmolive Company & Anor v Cusson Pty Ltd (1993) 118 ALR 248 observed at 256–257:
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1. The problem arises in adversary litigation, ie litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this court the provisions of O 62, rr 12 and 19, and the Second Schedule to the rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4.In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client 88as and when the justice of the case might so require’’. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: the categories in which the discretion may be exercised are not closed’’. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp);the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
The category of cases in which a court may make an indemnity costs order are not closed and are not limited to those identified by Sheppard J.
In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 at 87,471 the Full Court said:
… 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 and party basis”: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
In light of the authorities, I am not satisfied that there are exceptional circumstances that warrant an order for costs on an indemnity basis.
I am, however, satisfied that an order should be made for the husband to pay the wife’s costs on a party and party basis, given he was wholly unsuccessful in the proceedings. Litigation in this Court is extraordinarily expensive (evidenced by the wife’s claim for indemnity costs exceeding $87,000). The circumstance where a party embarks upon litigation and is ultimately wholly unsuccessful, and the consequence is that the other party is put to costs, is a justifying circumstance that warrants departure from the general rule that each party pay their own costs.
Accordingly, I propose to make an order to that effect.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 22 March 2024
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