Addison & Leahy
[2008] FamCA 248
•16 April 2008
FAMILY COURT OF AUSTRALIA
| ADDISON & LAHEY | [2008] FamCA 248 |
| FAMILY LAW – COSTS - Inter Parties- whether husband should be ordered to pay wife’s costs including a claim for costs on an indemnity basis – facts and circumstances of the case |
| Family Law Act 1975 (Cth) s 117 |
| Woodley & Time and Anor[2008] FamCA 162 ZH & N [2005] FamCA 828 |
| APPLICANT: | Ms Addison |
| RESPONDENT: | Mr Lahey | ||||
| FILE NUMBER: | (P)SYF | 3280 | of | 2003 | |
| DATE DELIVERED: | 16 April 2008 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Hobart |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 13 March 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bruce Crawford |
| SOLICITOR FOR THE APPLICANT | Murray & Associates |
| COUNSEL FOR THE RESPONDENT | Mr Phillip Connor |
| SOLICITOR FOR THE RESPONDENT | Argyle Partnership |
Orders
The husband pay the wife’s costs in relation to the objections to a subpoena filed 23 August 2006 and directed to the wife’s solicitors Murray & Associates, with such costs to include any appearances before a Registrar (but excluding the costs in respect of actual appearances before Benjamin J).
The subpoena to Murray & Associates filed by the husband on the 23 August 2006 be set aside.
The husband pay 70 per cent of the wife’s costs of the property and children’s proceedings, on a party/party basis, as and from the 12 May 2004 up to and including the date of final orders on 13 January 2006 but excluding:-
(a)the costs on the subpoena to Murray & Associates referred to in paragraph 1 above (but including 70% of the costs in respect of actual appearances before Benjamin J in respect of such subpoena);
(b)the costs associated with work done or disbursements incurred in respect of the costs orders made by Mushin J on the 8 June 2005 and the costs orders made by Hannon J on the 29 November 2004.
(c)The costs payable by the wife in respect of the Children’s Representative, totalling $14,175.50.
Each party pay their own costs in respect of these proceedings prior to the 12 May 2004.
The husband pay the wife’s costs, on a party/party basis, of the application for costs.
Costs payable pursuant to this order to be as agreed between the parties or as otherwise determined under the Rules of this Court and in that regard time be extended for the filing of a Bill of Costs for a period of ninety (90) days from the date of these orders.
This application is removed from the list of cases requiring determination.
All subpoenaed documents are to be returned to the persons or institutions from which they emanated and all exhibits are to be returned to the person or persons who tendered the same.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend
IT IS NOTED that publication of this judgment under the pseudonym Addison & Lahey & Addison ((Inter-party costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT HOBART |
FILE NUMBER: (P) SYF 3280 of 2003
| Ms Addison |
Applicant
And
| Mr Lahey |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This is an application by Ms Addison (“the wife”) for a costs order against Mr Lahey (“the husband”) arising out of the hearing of parenting and property proceedings in November/December 2005 where judgment was delivered and final orders were made by me on 13 January 2006. Those Orders were the subject of an appeal to the Full Court which was heard on 5 February 2007 and the appeal was dismissed by orders made 9 November 2007.
The wife seeks an order for costs of the whole of the proceedings before me and that such costs ought to be determined on an indemnity basis.
Also included in her application were orders for the costs reserved by Judicial Registrar Loughnan on the 3 November 2003. The wife had at one time sought orders in respect of costs reserved by Justice Boland on the 5 March 2004. That application was withdrawn by the wife’s counsel during submissions.
The husband opposed the making of any costs orders.
BACKGROUND
Part of the background between the parties was set out in my reasons in paragraph 7(a) – (bb) which provided:-
a) The husband is aged 41 years at the date of hearing.
b) The wife is aged 42 years at the date of hearing.
c) There are two children of the marriage namely a son J aged 8 and a daughter L aged 5.
d) The husband asserts the parties first met in about December 1995 and they commenced a relationship in May 1996. He asserts that he and the wife commenced living together in February 1997. The wife asserts co-habitation from September 1996.
e) The parties married in January 1998.
f) The wife says that the marriage came to an end in November/December 2002. The husband asserts that he regards the marriage as coming to an end on 1 March 2003.
g) On or about the 3 November 2002 the wife and the children travelled to Tasmania and returned to Sydney approximately three weeks later.
h) In November 2002 the wife commenced a sexual relationship with Mr M.
i) On the 7 December 2002 the wife returned to Tasmania and has resided in Tasmania with the children since that time.
j) On the 9 December 2002 the wife said that she informed the husband that the marriage was over and that she proposed to continue residing in Tasmania with the children.
k) In December 2002 the husband obtained legal advice in regard to issues that may arise in respect of a break-up of his marriage to the wife.
l) On the 20 December 2002 the husband travelled to Launceston and spent two days with the children.
m) On the 2 January 2003 the wife travelled to Sydney with the children and stayed at the former matrimonial home at C for approximately five days.
n) During that stay in C in January 2003 the wife packed a number of boxes with items for return to Launceston.
o) In mid to late January 2003 the wife commenced occupation of the home at Launceston (being a property owned by a Trust controlled by the wife’s father).
p) In early 2003 the wife’s relationship with Mr M developed to a stage where they commenced to live together.
q) In March 2003 the husband says he discovered the nature of the relationship between the wife and Mr M.
r) On the 7 March 2003 the wife took J to see a psychologist in respect of her concerns of an adjustment reaction she believed he had suffered as a result of the separation. This treatment was arranged and attended in the absence of consent from the husband and in circumstances where the husband had made clear to the wife his desire to be informed and involved in such treatment regarding the children.
s) In late March or early April 2003 there was an incident at E Primary School where another child in J’s class threatened to place his penis in J’s bottom and this other child placed his penis in or near J’s ear. This being seen in the context that this was the first year of full time primary school for both children, J having been enrolled at E Primary School earlier that year or late 2002.
t) On the 17 April 2003, the children had contact with husband in Sydney in accordance with a voluntary arrangement with the wife.
u) On the 24 April 2003, whilst the children were in the husband’s care for that contact visit, the husband commenced proceedings for parenting orders returnable on 9 May 2003. He retained the children in Sydney pending the outcome of those proceedings and in breach of his arrangement with the wife to return the children to Tasmania.
v) The husband asserts that he telephoned the wife at or about the time the April 2003 proceedings were commenced to inform her of his intentions to retain the children in Sydney.
w) During that period in April 2003, the husband enrolled J in a local Sydney primary school.
x) On the 9 May 2003, an interim Order was made by Registrar Henderson of the Family Court that the children reside with the wife and the children be returned to the wife on 11 May 2003. The wife was permitted to reside with the children in Launceston, Tasmania.
y) On the 11 May 2003, the children were returned to the wife from the home at C.
z) On the17 July 2003, by consent, final parenting orders were made by Registrar Jurd.
aa) On the 3 November 2003 an application was made by the husband for an extension of time to review the interim orders made by on 9 May 2003 was refused. The husband’s application for an extension of time to review the exercise of judicial power by a registrar on 17 July 2003 was extended to seven days from 3 November 2003.
bb) In December 2003 – D was born (being a child of the relationship between the wife and Mr M).
These proceedings commenced on the 24 April 2003 when the husband filed an application for parenting orders after having retained the children in Sydney after an access visit.
The wife filed an application for interim residence on the 30 April 2003 which was determined by Registrar Henderson (as she then was), in circumstances where the Registrar ordered that the children:
(a)reside with the wife,
(b)be returned to the wife on 11 May 2003 and;
(c)return to live with her in Tasmania.
On the 17 June 2003 the parties filed in Court, by consent, terms which provided for final orders that the children live with the wife. A further consent order was filed in Court on the 17 July 2003 providing that the children have contact with the husband and other consequential orders. At that time the husband was represented by his present solicitor, Glenda Laurance.
To all intents and purposes the parenting proceedings were brought to an end at that time.
In November 2003 the husband filed an application for an extension of time to review the exercise of judicial power by Registrar Henderson in respect of the order made the 17 July 2003. The wife opposed that application and Judicial Registrar Loughnan allowed the husband’s application for an extension of time. The husband was out of time in seeking that review and Registrar Loughnan ordered that the “time in which the husband may seek to review an exercise of judicial power by a Registrar on the 17 July 2003 be extended to a date 7 days from today’s date”. Further he made an order that the costs of the parties be reserved.
On the 28 November 2003 the wife filed an application to review Judicial Registrar Loughnan’s decision of the 3 November 2003 and on the 5 March 2004 that application was determined by Justice Boland. At that time the wife’s application to review was dismissed and the proceedings were then transferred to the Hobart Registry of the Family Court of Australia.
On the 12 May 2005 a Deputy Registrar of the Hobart Registry issued a trial notice requiring a pre-trial conference on the 23 August 2004 and directed that the affidavits of the parties and all witnesses be filed and served by the 9 August 2004. The Deputy Registrar also ordered a Family Report.
When the matter came before Her Honour Justice Dessau on the 10 June 2004 she observed:-
“2.There have been two applications before me today. There is the husband’s application to review the Deputy Registrar’s decision for a Family Report. He says a report should be prepared by a psychiatrist and, in particular, a New South Wales psychiatrist, Dr [W]. The wife’s application is for appointment of child representative and for the Family Report to be prepared by Victorian psychiatrist Dr [A]”
Her Honour further noted:-
“4.… Mr Connor for the husband has said, that the wife might previously have argued against the appointment of a child representative, although she now seeks one. If that is the case, it not surprising it raises the suspicion of delay tactics”.
Her Honour went on to make orders appointing a Child Representative (later Mr Fitzgerald took this role) who would assist in the selection of a psychiatrist.
On the 4 August 2004 all but two of the wife’s trial affidavits were filed in readiness for the pre-trial conference. They were not served. The two outstanding affidavits were that of the wife and Ms Y.
On the 6 August 2004 the husband’s solicitors maintained a view that the parties were not in a position to file their evidence. The wife asserts that on the 9 August 2004 her material was ready for exchange (which was not the process ordered by the Court).
The matter came back before the Court on the 5 October 2004 at which time Justice Hannon suspended telephone contact between the children and the husband. An order was also made that if “neither party nor the Child Representative make an application for an appointment for a costs hearing within 30 days there will be deemed to be no order as to costs”.
On the 20 of October 2004 the wife filed an application seeking an order that the husband pay the costs of and incidental to her application. That application was heard by Justice Hannon on the 29 of November 2004 and an order was made that the husband pay the wife’s costs of the applications of the 24 August 2004 and the 20 of October 2004.
In any costs order that I make pursuant to these reasons I specifically exclude any costs that were included in the costs order of Justice Hannon made the 29 of November 2004.
The husband had agreed to the appointment of Dr S as a single expert. On 6 December 2004 the solicitor for the wife informed the solicitor for the husband that the wife was ready to exchange affidavit material. On 13 December 2004 the solicitor for the husband informed the solicitors for the wife that the husband would not finalise his affidavit without seeing the report of Dr S.
The matter went into a defaulters list and Hannon J ordered that all affidavits be filed and served within twenty eight (28) days of the release of the report of Dr S.
On the 31 January 2005 Dr S’s report was released and the wife’s solicitors informed the husband’s then solicitors that they proposed filing and serving their documents on the 21 February 2005. On the 16 February 2005 the solicitors for the wife sought a pre-hearing conference.
On the 5 April 2005 Deputy Registrar Weidmann ordered all affidavits be filed and served by the 17 May 2005 and fixed the 24 May 2005 as a date for the pre-trial conference. On the 11 May 2005 the wife filed her remaining two affidavits, being that of herself and Ms Y and all the wife’s material was subsequently served on the husband’s solicitors. On the 17 May 2005 the husband filed his affidavit and that of six witnesses and the following day filed a statement of financial circumstances.
The matter was heard before me on the 29 and 30 November 2005 and on the 1, 2, 5, 7, 8, 9, 12 and 14 December 2005. I delivered my reasons for judgement on the 13 February 2006 and made orders in accordance with those reasons.
An offer to settle was received by the husband’s legal representatives on the 6 January 2005 and a further offer was provided in identical terms, except with the schedule attached on 11 March 2005.
The husband’s legal representatives sent a letter to the wife’s legal representative making an offer in relation to children’s matters on the 31 March 2005.
On the 4 April 2005 a letter was sent by the wife’s legal representatives to the husband’s legal representatives and sometime thereafter the husband re-engaged his legal representatives in Sydney.
In a letter to the Mediation Manger of the Family Court, dated the 1 June 2005, the Children’s Representative raised issues about Dr S’s report. The husband sought the appointment of a replacement expert psychiatrist in preference to a Family Report. A Family Report was ordered and Mr G provided that report.
At the time of the substantive hearing the wife’s brother was a party in his own Family Court proceedings which involved serious allegations. The husband made an application, on the day prior to commencement of the substantive hearing, to gain access to the family law file of the wife’s brother. The application was successfully opposed by the Children’s Representative and the wife although it was left open for the husband to renew that application.
In relation to the property issues, the property was divided as to 60 per cent to the wife and 40 per cent to the husband. The total net assets of the parties, at the date of hearing, was held to be $709,267.25. The adjustment ordered by me in February 2004 has been paid by the husband together with interest of about $23,000.00.
THE EVIDENCE
The wife relied upon her affidavit filed the 18 February 2008 (“the wife’s second affidavit”), her affidavit filed the 8 March 2006 (“the wife’s first affidavit”), the affidavits of her solicitor Roger Murray filed the 20 December 2007 and the 8 February 2008. She also referred to various parts of my reasons delivered on the 13 February 2006, various Court documents and other material as set out in counsel’s case outline provided for the hearing.
The husband relied upon his affidavit filed the 5 April 2006 (the husband’s first affidavit), his affidavit filed the 3 March 2008 (the husband’s second affidavit), an affidavit of his solicitor sworn the 30 March 2006 and other particular items referred to in his counsel’s costs submissions outline.
In addition tendered in evidence by the husband was a letter from the Child Representative to the mediation section of the Family Court in relation to the provision of a Family Report. In that letter the Children’s Representative observed:-
“As you are aware, the only independent evidence is the Single Expert Report undertaken by Dr [S]. That report focused on the adult’s emotional and psychiatric help and its impact on their capacity to parent.
There is no, in my view, independent evidence addressing the social dynamics of the family. This lacunae in the evidence ought to be addressed by a Family Report.
I note there is some resistance to such a Report.
On the basis that:-
(a)His Honour Justice Mushin’s orders a s62G report; and
(b)A convenient venue for interviews for the report is Launceston.
Could you please provide me with convenient dates and times to allow preparation of such a Report. …”[1]
[1] Letter to the Mediation Manager of the Family Court from the Child Representative dated the 1 June 2005.
In relation to the submissions the Court will refer to the bulk of the material on the file and it was submitted, and accepted by the Court, that it would only be that material referred to in particular to which I would need to have regard.
Neither party sought to cross-examine the other in relation to affidavit material.
One of the preliminary issues was in relation to the interpretation of Rule 19:18 (3) of the Family Law Rules 2004 (Cth), as amended by Statutory Rules 2004 No: 351 which was in place at the time the proceedings commenced.
The submission of counsel for the wife was that the effect of this Rule was that costs prior to the amendment on the 17 December 2004 should be assessed in accordance with the scale or if there is a costs agreement in accordance with the costs agreement. It is submitted that this applied to party/party costs.
Reading the Rule and understanding the practice in relation to costs, it has generally been the case that costs determined on a party/party basis are to be determined in accordance with the scale and the Rules and not in accordance with a practitioner/client agreement.
The reading of the Rule, set out above, makes it clear that the determination of costs to which the Rule refers is in fact practitioner/client costs not party/party costs.
LEGAL PRINCIPLES TO BE APPLIED
As I set out in Woodley & Time and Anor[2008] FamCA 162 at paragraph 29 the relevant legal principals are:-
“29. The general rule in relation to s117(1) of the Act is that each party to the proceedings shall bear his or her own costs of the proceedings, subject to s117(2), s117AA and s118. If I am of the view that there are circumstances that justify me in doing so, I may make such order as to costs, whether by way of interlocutory order or otherwise, as I consider just. Section 117 of the Act requires me not only to consider that the order for costs be just but also that in the particular circumstances of the case, that there are circumstances that justify the making of the order. Section 117(2A) sets out the matters which I shall have regard to in determining what order if any is to be made under s117(2).
30. In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:
“The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.''
31.In the absence of their being circumstances that justify the court making an order for costs, then s117(1) provides that each party will bear his or her own costs of the proceedings under the act.
32.The interpretation to be applied to s117 and the inter relationship of s117(1) and s117(2) was considered by the High Court in Penfold v Penfold (1980) FLC 90-800. In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:
“It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.”
“Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case’”.
“Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.”
“Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19…(which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest...” (at 75,054).
“Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”
33.The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs”.
34.By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”. I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL [2005] FamCA 158 the Full Court held at paragraph 41:
“…Nowhere in subsection 2(A) or elsewhere in section 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 subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”
35.In the matter of I and I (No 2) FLC 92-625, the Full Court at p 82,277 said:
“that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs.”
36.In this case Nicholson CJ, Ellis and Baker JJ declined to follow the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case his Mushin J had said at p 81,271;
``In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order were made.''
37.The Full Court in I and I (No 2) above, declined to follow this approach and held at p 82,277;
“With respect... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.''
It is an agreed fact that the husband was receiving rent on a property at C until about Christmas 2007. That rent being $580.00 per week. That property is presently unlet and the husband lives with his mother.
THE RELEVANT FACTORS
I am required to consider the matters set out under s117(2A) of the Family Law Act 1975 (Cth) (“the Act”) to determine whether I should exercise my discretion in making an order for costs.
(a)the financial circumstances of each of the parties to the proceedings;
The Full Court in Kelly & Kelly (No. 2) (1981) FLC 91-108 and Jensen & Jensen (1982) FLC 91-263 said that a disparity in the financial resources between the parties may justify an order for costs in favour of the party with fewer resources. The Full Court affirmed this approach in the decision of Marinko & Marinko (1983) FLC 91-307.
In Re David: costs (1998) FLC 92-809 the Full Court discussed the principal in regard to the impact of the financial circumstances of the parties in determining costs orders. The Full Court observed at page 85,149:-
‘While we cannot find that she has the ‘clear capacity’ to meet an order for costs, there are a number of reasons why we are not prepared to draw the inference that she does not have such a capacity:-
First it would appear to us that since the time of her opposition to meeting half the costs of an updated family report, she has found funds to engage counsel at trial of both senior and junior counsel for the appeal. Whether the source of such fund is from a third party is not a matter that need concern us ….
Secondly, we can accept the considerable cost may have accompanied such engagement. Whilst that may be a factor relevant to the mother’s financial circumstances, the fact of having occurred such expenses cannot be a shield against an order for costs against her. To the contrary and wel agree with the child representative, that with such legal advice at their disposal, it must be assumed that she was aware that a costs order may follow if her appeal did not succeed”.
This has been a particularly sad case for the husband and wife. The wife’s financial position is set out in her second affidavit. She has married Mr M and they have the care of the two children of the marriage, between the husband, and wife and D, aged four. The wife and Mr M now live in a home they have purchased at N. The wife’s equity in that home is some $300,000.00. Taking into account liabilities she has, including liabilities in relation to the funding of these proceedings, she has net assets of some $118,000.00.
Added to that will be the costs she receives in respect of the Full Court proceedings. The wife incurred $89,000.00 in costs in those proceedings. That is clearly on a practitioner/client basis. It is unlikely that she will receive anywhere near that sum from the husband by way of a taxation on a party/party basis pursuant to orders of the Full Court.
The wife is employed part time. The husband submitted that she had a capacity for further work. I do not accept his submission in that regard. The wife has the care of three children including D who is still aged under 5.
The wife relies upon the income of Mr M, her own income and child support of about $462.00 per week from the husband.
The husband’s asset circumstances are worse. His liabilities exceed his assets. The husband is, however, a specialist medical practitioner who works in private practice. He resides with his mother. The children of the parties live in Tasmania and there is considerable expense associated with the time he spends with them. In addition he has further liabilities in terms of the costs of the Child Representative and the costs of the wife in the appeal. His income between 1998 and 2003 was between $122,000.00 per annum and $152,000.00 per annum. However, I find the husband has the capacity to earn a significantly greater income by working more than the hours disclosed during the hearing.
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid, and if so, what are the terms of the grant of that assistance by the parties;
Neither party is in receipt of legal aid.
Each of the parties will be liable to pay one half of the costs of the child representative. This is a liability to each party of $14,175.50.
(c) the conduct of the parties to the proceedings in relation to the proceedings including without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admission of facts, production of documents and similar matters;
In terms of the conduct of the parties counsel for the wife raises a number of issues.
Firstly, by orders made the 16 July 2003 and the 17 July 2003 the parenting proceedings were brought to an end. The effect of these orders was that the children would live with the wife in Tasmania and the husband would visit the children from New South Wales. It was, notwithstanding the assertions by the husband, unlikely that an order would be made removing the children from the primary care of the wife. She had been the children’s primary carer from birth and the reaggitation of the issues of parenting after final settlement was unlikely to be successful.
As I said in my reasons:-
“51.The husband’s feelings of antipathy to the wife and [Mr M] as reflected in the evidence provided by [Mr JS]”
I went on to accept the evidence of Mr JS that the husband had said:-
“His plan was working well in dragging out the proceedings, even if he had to keep adjourning them adjourning them even if he went bankrupt because then [the wife] would get half of nothing”.[2]
[2] Paragraph 9 (i) of the affidavit of Mr JS filed the 18 August 2005.
Mr JS’s evidence, which was accepted, was that in a conversation with the husband the husband said:-
“He only wants the children 50% of the time on the basis that “the wife” lived with them in Sydney”.[3]
[3] Ibid at paragraph 9(b).
The conduct of the husband from at least the transfer of the proceedings to Hobart was to expand the conflict and to, as he said “drag out the proceedings”.
It took almost two years from the transfer from Sydney to the final hearing and determination of this case. The parties have incurred enormous amounts of costs, which are completely out of proportion with the issues to be determined.
Counsel for the husband, presumably on the husband’s instructions, raised significant levels of objections to affidavit material which used up almost two days of hearing time. The wife was in the witness box for a long period of time and was cross-examined at length. I accept the submissions of counsel for the wife that the factors set out under s68F(2) of the Act were strongly in favour of the wife’s case. It was open to the husband, who had counsel and a solicitor acting for him throughout, to see the writing on the wall with regard to the parenting of the children.
The husband’s response to the reports of Dr S and the Family Report was to continue with the litigation notwithstanding the evidence of those experts upon which the Court placed considerable weight.
Counsel for the wife submitted that the husband’s trial involved a detailed analysis of the circumstances of the marriage breakdown. Significant time in affidavits and during the trial was taken in dealing with this material. The husband’s credit was impeached during the trial as is set out in my reasons in paragraphs 10-25, 35, 37, 51–53 and 123.
The husband was reluctant to file affidavits, despite directions to do so. His counsel submitted that that was the “Sydney practice”. I do not accept that there was a practice of disobeying directions and there ought not to be a practice of disobeying the directions of Courts to file affidavits and prepare for trial.
Counsel for the husband submitted that the wife’s conduct was far from exemplary at material times and that she had failed to comply with directions made by the Court in respect of filing affidavit material.
I accept that the wife had from time to time not complied with the directions.
The husband’s concern about the breakdown of the marriage was reflected in his submissions about a finding made by me that the wife had not sought legal advice prior to her retention of the children. That was a relatively minor matter in the scheme of the findings. The husband persisted with his complaint about this issue on the costs argument. Having considered all of the submissions and looked at the material provided to me, I am satisfied that the husband did cause these proceedings to be longer in preparation and hearing than would otherwise have taken.
Counsel for the wife asserted that the husband had no arguable case. It is clear that the husband had a weak case in relation to children’s issues with the exception of the exclusion of the wife’s brother from spending unsupervised time with the children and the restoration of telephone time. He had a weak case but it was arguable.
The husband’s continued attack upon the wife’s psychiatric state despite the report by the single expert is indicative of his approach in that regard.
(d)whether the proceedings where necessitated by the failure of a party to the proceedings to comply with the previous orders of the Court.
This is not a relevant consideration. Neither parties counsel address this as a submission.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
It cannot be said either party were wholly successful or wholly unsuccessful in relation to the parenting matters. In relation to the principal parenting issue, that is, whether the children resided with the wife in Tasmania or the husband in New South Wales, the wife was wholly successful in this regard.It cannot be said either party were wholly successful or wholly unsuccessful in relation to the parenting matters. In relation to the principal parenting issue, that is, whether the children resided with the wife in Tasmania or the husband in New South Wales, the wife was wholly successful in this regard.The wife was not successful in allowing the children to have unsupervised contact with her brother although this was conceded by her in correspondence where, in a letter to the husband’s then solicitors say[4]:-
“….. As your client is aware, our client’s brother […] …. is currently involved in his own Family Court proceedings which involve allegations against him of child sexual abuse. Our client does not accept those allegations and is convinced that her brother is innocent. Certainly, up to the time when the parties separated, your client expressed similar sentiments. However, on a logical basis that [the wife’s brother] does not currently have unsupervised contact with his own child, our client will consent to an Order that pending resolution of those allegations in [the wife’s brother’s] favour that [the wife’s brother] not have unsupervised contact”.
[4] Exhibit 22 to the first affidavit of the wife filed the 8 March 2006.
Therefore in April 2005 the wife was content to put in place orders until such time as the allegations were resolved in her brother’s favour. This is not a letter written by a party, it is a letter written by her solicitor knowing the consequences of a resolution in her brother’s favour.
The husband was successful in restoring telephone time with the children.
(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;
In the decision of P & P (No. 2) [2005] FMCAfam22 Federal Magistrate Brown said at paragraph 45:
“This factor, together with the respective financial circumstances of the parties, constitutes an important consideration. The import of section 117 (2A)(f) is to ensure, that when offers to settle are made, they are seriously considered by the other party. Litigation is expensive and for that reason is not to be embarked upon lightly. Accordingly, courts such as this one should encourage the parties to litigation to seek a compromise of their proceedings and should discourage a party from cavalierly disregarding any reasonable offers to settle”.
In his submissions counsel for the husband asserts that:-
“the offer she made to the husband to settle the property proceedings and the children’s proceedings (being exhibits 18 and 19 to her first affidavit)…were identical (save for a schedule attached).
In terms of the property proceedings the wife sought an order that properties be transferred to the husband and that the wife be paid $430,768.00 plus “sixty per cent of the sum already paid by the husband prior to the date of this offer by way of the costs and expenses of proceedings between the parties in the Family Court of Australia both as to children’s matters and property matters less any amounts owing in respect by way of loan of money borrowed to pay such costs and expenses) as to which liberty was reserved to either party to apply for an order to finding the amount thereof”.[5]
[5] Exhibit 18 of the first affidavit of the wife filed the 8 March 2006.
At the end of that offer the wife adds:-
“22.That each party have liberty either before an order is made, consequent upon acceptance of this offer within thirty days after the date of the order to apply for an order for the other party to pay the costs for any of the proceedings between the parties including any interlocutory proceedings whether in respect of costs that have been reserved or not but excluding any portion of the proceedings in respect of any which a costs order has already been made”.
The second part of the offer, that is paragraph 11(a) (ii) is unclear as to its meaning. In his submissions counsel for the wife ignored that provision. Counsel for the husband submits that the offer, if accepted, would have been far greater than the amount of the order made against him.
The property offer made by the wife is constructed in such a way that it is not clear and as such I do not take it into account in determining the question of costs.
With regard to children’s matters, an offer was made on the 22 December 2004, as referred to above, with the exception of the telephone contact and the supervision of the wife’s brother. A further offer was made on the 31 March 2005 by the husband which was the subject of a counter offer by wife dated the 4 April 2005. The offer by way of counter offer, in the wife’s submissions, of 4 April 2005 did not receive a response.
Whilst not expected, if properly dealt with by the husband the wife’s offer would have reduced the issues to be determined between the parties considerably and would presumably have had an impact on the resolution of the property proceedings. I have regard to the husband’s failure to respond to the offer of the wife and infer that from his silence the wife could only conclude that the matter would proceed to trial.
Counsel for the husband in his submissions also raised the question of the money sought by the wife before Judicial Registrar Loughnan from the AssettLink account in her name. Counsel for the husband asserted the wife should not obtain a cost order covering the proceedings in circumstances where she caused the parties to “incur costs in the pursuit of injunctions when she never utilized the money for the purchase of a new motor vehicle as the Court had been lead to believe the proceedings were necessitated by”.[6] This was dealt with in the course of the proceedings.
(g) such other matters as the Court considers relevant
[6] Paragraph 81 of the Costs Submissions sent to Court on 7 March 2008
filed by the husband on the ………………….I have had regard to the submissions made by the counsel for the husband and have considered those submissions, much of which is dealt with otherwise in these reasons.
(g) other matters relevant
COSTS OF THE SUBPOENA
The wife also seeks costs in relation to a subpoena issued, by the husband to her solicitors Murray & Associates, and filed on the 23 August 2006. That application is the subject of submissions filed on behalf of the husband on the 30 August 2006.
The subpoena was issued in the wrong court. The issue on the subpoena related to legal advice being sought by the wife prior to April 2003. That has little or not relevance to the issues before this Court, that is the question of costs.
That issue was the subject, as I understand it, of debate in the Full Court including an application by the husband to call further evidence. The husband was unsuccessful in his application.
The issue of the subpoena in this Court was in the circumstances unnecessary and the subpoena will now be set aside by virtue of orders which I will make by consent.
The wife objected to the subpoena and significant costs were incurred in relation to that subpoena. Accordingly I will be ordering the husband to pay the costs of the wife in respect of objections to the subpoena issued by him on the 23 August 2008 addressed to Murray & Associates.
I am aware of the consequences for the husband if an order for costs is made against him. His financial position is worse than the wife’s. However the husband must bear a significantly larger proportion of the responsibility for the matter proceeding to trial than the wife. In this matter I am satisfied that it is appropriate to depart from the general rule that each party to the proceedings should bear his or her own costs.
INDEMNITY COSTS OR PARTY/PARTY COSTS
The only matter remaining for determination is whether it is appropriate in the circumstances of this case that I make an order that the husband pay the wife’s costs on an indemnity basis.
Counsel for the wife submitted that any costs awarded in favour of the wife should be awarded on an indemnity basis. The basis of his argument was threefold:
(a)firstly that the Court has the power to order indemnity costs;
(b)secondly that indemnity costs are the norm in case, and referred to the rules which he submitted were in force at the date of the reasons for my judgement in particular Rule 19.18 (3) of the Family Law Rules 2004 (Cth) as amended by Statutory Rules 2004 No:351, and;
(c) thirdly that exceptional circumstances existed in this matter so as to justify the making of an indemnity costs order.
In reply counsel for the husband submitted this was not a matter where indemnity costs were appropriate and that if the Court were to adopt the reasoning of the wife’s counsel in relation to the application of the Family Court Amendment Rule No 3/2004 in relation to indemnity costs “it would turn matters on their head as we know them”.
Counsel for the husband also submitted that although the Court can in prescribed circumstances make an order for indemnity costs, “the circumstances must be of an exceptional kind, and it should appear that the proceedings were commenced in circumstances where a party properly advised had no chance of success and that the Court would draw an inference that the actions taken were for ulterior motive.”[7] He submitted this was not a case where circumstances were of an exceptional kind, and where proceedings had been commenced for an ulterior motive by the husband, and on this basis an order for indemnity costs should not be made against the husband.
[7] Ibid at paragraph 60.
Section 117 of the Act authorises me to make such orders for costs as I consider just. The most common form of assessment is for costs on a “party and party basis”, as agreed or taxed, however costs may also be made on a “solicitor and client” or “indemnity basis”. The general rule is that indemnity costs should only be ordered where there are “circumstances of an exceptional kind”.[8]
[8] Kohan and Kohan (1993) FLC 92-340 at 79,614.
Where costs are sought on an indemnity basis and the costs incurred arise under a costs agreement, the terms of the agreement must be disclosed to the Court.[9]
[9] Rule 19.08(3) of the Family Law Rules 1975.
The Explanatory Guide to the Family Law Rules provides a definition of indemnity basis as follows:
“an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been unreasonably incurred”.[10]
[10] CCH Australian Family Law Handbook Court at Page 7,432.
In Munday and Bowman (1997) FLC 92-784 Chief Justice Holden reviewed the relevant authorities and principles in relation to indemnity costs. His Honour noted at that whilst there is no doubt that the Court has the power to award costs on an indemnity basis[11] the decision in Kohan and Kohan (1993) FLC 92-340 “did not give any indication of what might be regarded as exceptional circumstances”.[12] His Honour then turned to the Federal Court decision of Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225 and noted the circumstances identified by Sheppard J in that case where the exercise of the discretion to award costs on an indemnity basis have been thought to be warranted. Holden CJ set these out at 84,660:
[11] At 84,659.
[12] Ibid at 84,660.
“a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd. (supra)
(c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991)).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).
(e) An imprudent refusal of an offer to compromise.”
Later the Full Court (Lindenmayer, Holden and Mullane JJ) in Yunghanns v Yunghanns (2000) FLC 93-029 followed the decision of Kohan (supra) and commented that the category of circumstances which would satisfy an order for indemnity costs is not closed. The Court said (full citations omitted):
“31. …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 JEL and DDF (No 2) (2001) FLC 93-083 the full Court (Kay, Holden and Guest JJ as he then was) commented that “the category of cases in which it would be appropriate to make an order for indemnity costs does not appear to be fully defined”. [13] Kay, Holden and Guest JJ (as he then was) held that the failure to accept an offer to compromise was without more insufficient to justify the making of a costs order on an indemnity basis. They stated at page 88,422:
“In our opinion, the failure to accept an offer which in retrospect, perhaps, should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis. The rejection of the offer must be at the very least imprudent. We express no opinion as to when the rejection of an offer may be so classified…”
[13] At page 88,441.
More recently in ZH & N [2005] Fam CA 828 Bryant CJ with whom Coleman and May JJ agreed, held that there were particular facts and circumstances in that case (actions taken by the husband were to delay the progress of the case) which warranted the making of a costs order other than on a party party basis. The Chief Justice also affirmed the decision of the Full Court in Yunghanns (supra) that a collateral purpose need not be established against the person against whom the indemnity costs order is sought:
“13 In Roth v Quinn [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.”
14I 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)…
17.I would, for my part, be prepared to infer on that basis that the appeal was instituted as a delaying tactic. But in any event, it is not necessary, as the Full Court in Yunghanns said, that some collateral purpose be established. I am satisfied, for my part, that there are particular facts and circumstances in this case in the nature of the appeal and its subsequent abandonment that warrant the making of an order for the payment of costs other than on a party-party basis...
CONCLUSION
Having considered the evidence of the parties and the various matter set out within section 117 of the Act I find that in the case before me there are no circumstances whether relating to collateral purposes, fraud or other issues, to warrant the making of a costs order against the husband on an indemnity basis. Accordingly I propose to make an order that the husband pay the costs of the wife, on a party and party basis.
Having regard to all of the factual matters set out in these reasons, I find that this is a matter where there are circumstances such as to justify the making of an order for costs on a party party basis.
I certify that the preceding one hundred (1002) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin
Legal Associate:
Date: 16 April 2008
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