ALI & ALI
[2020] FamCA 625
•10 August 2020
FAMILY COURT OF AUSTRALIA
| ALI & ALI | [2020] FamCA 625 |
| FAMILY LAW – COSTS – Where the wife seeks orders for costs payable by the husband in respect of substantive property proceedings and proceedings concerning a joinder Application filed by the husband’s mother – Where the husband filed a Response in support of the joinder Application – Whether the conduct of parties in respect to the substantive proceedings justifies making of orders for costs – Where the wife was successful in respect of both proceedings – Where the wife has reached agreement with the husband’s mother for payment of her costs in respect of the joinder Application – Whether the husband’s refusal of offer warrants orders for indemnity costs – Court finds an order for costs should be made in respect of substantive proceedings – Court finds that an order for costs should not be made in respect of the joinder Application – Order made for costs against the husband as agreed or assessed on a party/party basis. |
| Family Law Act 1975 (Cth) s 79(4), 117 Family Law Rules 2004 (Cth) r 19.18 |
| Byrnes v Brisconnections Management Company Limited (No 2) [2009] FCA 1432 Calderbank v Calderbank [1975] 3 All ER 333 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 D & D (Costs) (No 2) (2010) FLC 93-435 Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123 I Limited & Chester (Costs) [2011] FamCAFC 51 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 In the marriage of Nemeth and Nemeth (1987) FLC 91-844 Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 Munday v Bowman (1997) FLC 92-784 Nada & Nettle (Costs) (2014) FLC 93-612 Penfold v Penfold (1980) 144 CLR 311 Somers & Ettridge [2020] FamCAFC 37 Stoian & Fiening (Costs) [2014] FamCA 944 Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 |
| APPLICANT: | Ms Ali |
| RESPONDENT: | Mr Ali |
| FILE NUMBER: | SYC | 5846 | of | 2014 |
| DATE DELIVERED: | 10 August 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland DCJ |
| HEARING DATE: | 30 March 2020; by way of written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Ridley |
| SOLICITOR FOR THE APPLICANT: | Matthews Folbigg Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Ms McKinley |
| SOLICITOR FOR THE RESPONDENT: | Russell Kennedy Aitken Lawyers |
Orders
That Mr Ali (“the husband”) pay Ms Ali’s (“the wife”) costs of and incidental to these proceedings, assessed on a party/party basis in respect to the period subsequent to 31 January 2018, other than the costs incurred by the wife in respect to the Application in a Case filed by the husband’s mother, Ms K, on 23 September 2019 and the Amended Application in a Case filed by Ms K on 18 October 2019.
The costs determined in accordance with Order (1) are to be paid within 28 days of being agreed or assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ali & Ali has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5846 of 2014
| Ms Ali |
Applicant
And
| Mr Ali |
Respondent
REASONS FOR JUDGMENT
Introduction
This decision concerns two (2) Applications for costs filed by Ms Ali (“the wife”) against Mr Ali (“the husband”).
The first Application filed by the wife concerns the substantive property proceedings between the wife and the husband, which were finalised by Orders for final property distribution in accordance with those sought by the wife (“the substantive Application”). My Reasons for Judgment concerning the substantive Application were delivered on 24 December 2019 (“the primary judgment”). [1]
[1] [2019] FamCA 1012
The second Application is made in circumstances where the husband’s mother, Ms K, filed an Application in a Case on 23 September 2019, as amended on 18 October 2019, seeking to be joined as the Second Respondent to the substantive proceedings between the wife and the husband (“the joinder Application”). The wife opposed the joinder Application. The husband, however, filed a Response on 22 October 2019 in support of Ms K’s Application. The joinder Application came before me for hearing on 22 October 2019 on which date I dismissed the Application. My reasons for dismissing the Application were included in the primary judgment.
Accordingly, in her Application in a Case filed 16 January 2020, the wife seeks orders requiring the husband to pay her costs of and incidental to the substantive Application and the joinder Application.
While the wife’s Application also seeks orders for costs against Ms K, consent Orders were made by the Court on 25 May 2020 resolving the matter of costs between the wife and Ms K such that Ms K pay the amount of $3,000 to the wife. The wife now seeks to recover the balance of the costs she incurred, in contesting the joinder Application, from the husband.
A comprehensive summary of the background to this matter is set out in the primary judgment.[2]
Applications
[2] [2019] FamCA 1012, [5]-[57], [60]-[66].
Orders sought by the wife in respect of the substantive Application
The wife seeks that orders be made in accordance with those set out in her Application in a Case filed 16 January 2020 and sealed on 28 January 2020, as follows:
1. That pursuant to section 117(2) of the Family Law Act 1975 (Cth) (“The Act”) and Rule 19.18(1) of the Family Law Rules 2004 (Cth) (“The Rules”), [the husband] is to pay the applicant wife’s costs of and incidental to these proceedings [the substantive Application] for property adjustment on the following basis either:
1.1. On an indemnity basis in the sum of $313,500; or in the alternate and without concession;
1.2. On an indemnity basis as agreed or assessed, or in the alternative and without concession;
1.3. On a solicitor and client basis in the sum of $220,000; of in the alternative and without concession;
1.4. On a solicitor and client basis as agreed or assessed, or in the alternative and without concession;
1.5. On a party and party basis in the sum of $170,000, or in the alternative and without concession;
1.6. On a party and party basis as agreed or assessed.
1.7. That the Court certify for Senior Counsel for the trial including all preparation.
1.8. That the husband shall pay the costs of and incidental to this application.
1.9. Such further or other Orders that this Court deems fit
A. It is NOTED that:
a. the Initiating Application filed by the wife on 19 September 2014, as amended on 9 October 2019 (“the wife’s application”) was filed in the Federal Circuit Court of Australia;
b. these proceedings were transferred to the Family Court of Australia on 1 July 2016.
c. [The husband] filed a response to the wife’s application on 10 December 2014, as amended on 24 October 2019.
Orders sought by the wife in respect of the joinder Application
The wife also seeks that orders be made in accordance with those set out in her Amended Application in a Case filed 16 January 2020, as follows:
1. That pursuant to section 117(2) of the Family Law Act 1975 (Cth) (“The Act”) and Rule 19.18(1) of the Family Law Rules 2004 (Cth) (“The Rules”), [the husband] is to pay the applicant wife’s costs of and incidental to:
a. the Application in a Case filed by [Ms K] on 23 September 2019, as amended on 18 October 2019 and heard on 22 October 2019;
b. the Response to this application filed by [the husband] on 22 October 2019 and heard on 22 October 2019.
on the following basis either:
i. On an indemnity basis in the sum of $313,500; or in the alternate and without concession;
ii. On an indemnity basis as agreed or assessed, or in the alternative and without concession;
iii. On a solicitor and client basis in the sum of $14,000; or in the alternative and without concession;
iv. On a solicitor and client basis as agreed or assessed, or in the alternative and without concession;
v. On a party and party basis in the sum of $10,000, or in the alternative and without concession;
vi. On a party and party basis as agreed or assessed.
vii. That the Court certify for Senior Counsel for the hearing on 22 October 2019 including all preparation.
viii. That the husband shall pay the costs of and incidental to this application.
2. That pursuant to section 117(2) of the Act and Rule 19.18(1) of the The Rules, [Ms K] is to pay the applicant wife’s costs of and incidental to the Application in a Case filed by [Ms K] on 23 September 2019, as amended on 18 October 2019 and heard on 22 October 2019 on the following basis either:
i. On an indemnity basis in the sum of $18,794.75; or in the alternate and without concession;
ii. On an indemnity basis as agreed or assessed, or in the alternative and without concession;
iii. On a solicitor and client basis in the sum of $14,000; or in the alternative and without concession;
iv. On a solicitor and client basis as agreed or assessed, or in the alternative and without concession;
v. On a party and party basis in the sum of $10,000, or in the alternative and without concession;
vi. On a party and party basis as agreed or assessed.
vii. That the Court certify for Senior Counsel for the hearing on 22 October 2019 including all preparation.
viii. That [Ms K] shall pay the costs of and incidental to this application.
3. The costs referred to in Order 1 and Order 2 shall be as agreed within 14 days from the date of these Orders or as otherwise assessed on an indemnity basis.3. Such further order or other Order as this Court deems fit.
4. That the husband and [Ms K] shall pay the costs of and incidental to this application, jointly and severally.
As noted, the wife and Ms K were able to reach an agreement in respect of the costs associated with the Application in a Case filed by Ms K on 18 October 2019. Accordingly, the wife does not press her proposed order 2 as set out in her Application in a Case filed 16 January 2020. In the written submissions filed on behalf of the wife, it is conceded that the relief sought against the husband in her Application in a Case should be reduced by $3,000 on account of the agreement reached between the wife and Ms K.
Orders sought by the husband
The husband seeks that orders be made in accordance with those set out in his Response to an Application in a Case filed 18 May 2020, as follows:
1. That the Application in a Case filed by [the wife] on 18 November 2019 and amended Application in a Case filed by [the wife] on 16 January 2020 be dismissed.
2. That the Application in a Case filed by [the wife] on 16 January 2020 be dismissed.
3. That there be no Orders as to costs.
Evidence
The wife relied upon the following documents:
a)Application in a Case filed 16 January 2020 and sealed on 28 January 2020 (“the substantive proceedings costs Application”);
b)Affidavit of the wife filed 16 January 2020 (“the substantive proceedings costs Affidavit”);
c)Amended Application in a Case filed 16 January 2020 (“the joinder proceedings costs Application”);
d)Affidavit of the wife filed 16 January 2020 (“the joinder proceedings costs Affidavit”);
e)Written submissions of the wife in respect of the substantive proceedings costs Application filed 29 May 2020;
f)Written submissions of the wife in respect of the joinder proceedings costs Application filed 29 May 2020; and
g)Written submissions of the wife in response to the written submissions of the husband filed 20 June 2020.
The husband relied upon the following documents:
a)Response to an Application in a Case filed 18 May 2020;
b)Affidavit of the husband filed 18 May 2020;
c)Financial Statement of the husband filed 18 May 2020;
d)Affidavit of the husband filed 4 September 2019;
e)Financial Statement of the husband filed 4 September 2019; and
f)Written submissions of the husband filed 11 June 2020.
The law – concepts and principles
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the basis upon which the Court is empowered to award costs. That section relevantly provides:
(1) Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(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, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(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; and
(g) such other matters as the court considers relevant.
Those provisions make clear that, while the general rule in family law proceedings is that each party bears his or her own costs, the Court may order a party to pay the costs of another where there are circumstances justifying the making of such an order.
The considerations set out in s 117(2A) of the Act must be taken into account in deciding whether or not to order a party to pay the costs of another. No one factor under s 117(2A) prevails over any other factor. It is a matter of weight that is accorded to each of the relevant factors in the trial judge’s discretion: Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 per Strickland J.
As such, a litigant seeking a costs order must establish that the justice of the case requires an order for costs, by reference to the non-exhaustive list of statutory considerations set out in s 117(2A) of the Act, before such an order is made. Although the applicant for costs must establish circumstances which would justify such an order, it is not the case that a costs order can only be made in what has been described as “a clear case”: Penfold v Penfold (1980) 144 CLR 311 at 315.
Accordingly, there is “nothing to prevent any factor being the sole foundation for an order for costs” being made: Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 Fam LR 123 at 130.
Consideration – costs in respect of the substantive Application
The parties have each filed extensive written submissions in respect to the Applications being considered in this matter. I have considered those submissions together with the additional factual material set out in the Affidavits which each of the parties have filed in support of their respective Applications. I will refer to the material and submissions by broadly summarising the substance of the parties’ respective contentions of law and fact where I have considered those contentions to be relevant to the decision that I make in this matter.
Essentially, it is necessary to determine whether the wife, who seeks an order for costs, has established circumstances justifying such an order which displaces the presumption set out in s 117(1) of the Act. It is not necessary to establish extraordinary or exceptional circumstances, however, there must be circumstances which, at the absolute discretion of the Court, justify a costs order: Stoian & Fiening (Costs) [2014] FamCA 944 at [19] (“Stoian”) having regard to the matters set out in s 117(2A) of the Act.
Subsection (2A)(a) – The financial circumstances of each of the parties to the proceedings
The wife contends that, as a result of the primary judgment, each party has access to property which is now held in each of their sole names.
The husband contends, however, that despite findings made in the primary judgment that he has a substantial residual earning capacity, he remains unable to obtain employment, including as a result of having sustained a work-related injury as referred to in the primary judgment. The husband has presented further evidence that his current partner has also been unable to obtain employment.
Further, the husband notes that the primary judgment resulted in the wife owning all Australian-based property in the parties’ pool of assets subject to division and that, in the event of a costs order being made against him, it will be necessary for him to sell the one property that has been transferred to him which is a property located in the United States.
At the substantive hearing of this matter, the parties were in agreement that the property, which they jointly owned at that time, at 1 G Street, City H, State J was valued at the sum of $1,102,600. The mortgage on that property was agreed to be $311,131. The primary judgment resulted in that property being transferred into the sole name of the husband. I am satisfied that the husband’s ownership of that property provides him with the ability to raise sufficient capital, either by way of sale or borrowing, to satisfy an award of costs associated with the substantive proceedings.
In any event, even if I was not so satisfied, I would have, for the reasons set out below, nonetheless determined that an order for costs should be made against the husband. In that respect, I note that, in Nada & Nettle (Costs) (2014) FLC 93-612, the Full Court held “That a party [being] impecunious, even indigent, is not a bar to the making of a costs order if the Court is otherwise of the opinion that such an order ought to be made”.
Subsection (2A)(b) – Whether any party to the proceedings is in receipt of assistance by way of legal aid
Neither party was legally aided and, accordingly, s 117(2A)(b) of the Act is not a relevant consideration.
Subsection (2A)(c) – The conduct of the parties to the proceedings in relation to the proceedings
Both parties contend that the manner in which each of the parties has conducted these proceedings is a relevant consideration to the Court deciding whether there should be an order for costs.
Both parties allege that each party had, during the course of the litigation, provided inadequate disclosure. Further, the husband contends that the wife had unnecessarily filed several Applications in a Case, including an Application seeking partial property distribution. In my assessment, those Applications were entirely justified in circumstances where the husband effectively controlled the bulk of the parties’ property and it was necessary for the wife to periodically work in two jobs at a time in order to raise sufficient funds to support herself and her daughter.
The husband further contends that his costs were unnecessarily increased by the fact that the wife changed solicitors, which resulted in a replication of work, including responding to requests made by those new solicitors for further disclosure. In circumstances where the disclosure provided by the husband was inadequate, the fact that those requests for additional disclosure were made were, again, in my view, entirely justified.
In the primary judgment, I made no adverse findings against the wife in respect to complying with her obligation of disclosure. However, that was not the case in respect to the husband. At paragraphs 98 to 113 of the primary judgment, I set out my findings in that respect. In that context, it is to be noted that s 117(2A)(c) of the Act specifically refers to a party’s failure to comply with their obligation in respect to discovery.
In In the marriage of Nemeth and Nemeth (1987) FLC 91-844 at 76,385, the Full Court noted:
The Family Law Act demonstrates by its terms that it is aimed at early resolution of disputes, where this is possible. Inadequate disclosure almost inevitably prevents there being a properly based approach to the question of settlement. Where the case goes to trial inadequate disclosure may lead to delays, sometimes requiring adjournment; invariably it leads to more protracted and costly proceedings. The failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs.
The non-disclosure by the husband, during the course of the litigation, was such that it prevented the possibility of any meaningful discussions between the parties to resolve the matter and made the contested hearing inevitable. It is the primary reason why I make an order for costs against the husband.
Subsection (2A)(d) – Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court
Relevant to the considerations that I have just outlined in respect to the application of s 117(2A)(c ) of the Act, at paragraph 99 of the primary judgment, I noted that:
On 17 June 2018, I made orders which included an order that the husband provide an undertaking as to disclosure in compliance with rule 13.15 of the Rules. No such undertaking was provided. Those orders also directed the husband, pursuant to rule 13.04(1)(g) to provide “details about disposal of property.”
Those Orders were not complied with by the husband. At paragraph 113 of the primary judgment, I noted that:
Not only does nondisclosure prevent the court from accurately assessing the benefit that the husband has received from the American property which, as noted, is jointly owned by both himself and the wife, it also makes it difficult to make an assessment of the husband’s income in the future for the purpose of considering whether it is appropriate to make an adjustment pursuant to s 75(2) of the Act.
In summary, the husband’s non-disclosure, as well as his failure to comply with Orders previously made requiring him to confirm that he would do so, made the hearing of this matter inevitable. It also added to the length of the trial as a result of additional complexities associated with the consideration of the issues to which I referred in paragraph 113 of my primary judgment.
Subsection (2A)(e) – Whether any party to the proceedings has been wholly unsuccessful in the proceedings
In property proceedings under the Act, it is unusual for a party to be wholly unsuccessful in the sense that there is usually an apportionment of property such that each party receives at least a portion of what was previously the parties’ matrimonial property. That outcome occurred in this case. However, the wife was wholly successful in obtaining the orders that she sought and, to that extent, the husband was wholly unsuccessful in opposing that outcome.
Even if the outcome was one that could not be said to be an outcome where the husband was wholly unsuccessful, the fact that the wife was wholly successful in her Application is a factor that I consider pursuant to s 117(2A)(g) of the Act.
Subsection (2A)(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 made offers of settlement to the husband on 31 January 2018, 1 February 2018 and 9 February 2018.
The offers made on 31 January 2018 and 1 February 2018 were in similar terms and referred to in paragraphs 3 and 4 of the wife’s substantive proceedings costs Affidavit. Those offers were stated to have been made in the context of the decision of Calderbank v Calderbank [1975] 3 All ER 333 and, in substance, provided for the following:
a)The husband to retain the property located at D Street, Suburb E;
b)The wife to receive monies identified as controlled monies;
c)The wife to receive the Company Q shares;
d)Both the property located at B Street, Suburb C and the State J property to be sold and the proceeds of sale to be divided 63% to 37% in the wife’s favour after paying certain liabilities;
e)The parties to retain other assets and liabilities in their own name or possession; and
f)The superannuation to not be split.
I accept that the effect of the wife’s offer was, as set out in those letters of offer, that the wife would receive approximately 47.6% of the parties’ then net property pool, excluding superannuation, and 49.1% of the parties’ net property pool if superannuation was included.
In this matter, having regard to considerations set out in s 79(4) of the Act, I determined that an appropriate adjustment of the parties’ matrimonial property was 55% in favour of the wife with the residual of 45% to the husband. That amount was reduced, however, as the end result of that determination was that the wife would have received an adjustment to her benefit over and above that which she sought in her Initiating Application. Nonetheless, the outcome of the proceedings was such that the wife received an adjustment in her favour of approximately 52% of the parties’ property, including superannuation. In other words, the outcome of the case resulted in the wife receiving an adjustment of property in her favour that exceeded the amount she would have received pursuant to the offers made on 31 January 2018 and 1 February 2018 by almost three per cent (3%.)
The wife made a further offer on 13 June 2019, as referred to in paragraph 6 of the wife’s substantive proceedings costs Affidavit and annexed at Exhibit C to that Affidavit. The substance of that offer was as follows:
·The wife retains all rights and interest in the Suburb C property;
·The wife assumes all liability owed or owing in respect of the Suburb C property;
·The husband transfers his interest in the Suburb E property to the wife and the wife indemnifies the husband in respect to any liabilities associated with the Suburb E property;
·The wife retains any capital gains tax liabilities with respect to the Suburb E property and indemnifies the husband with respect to the same;
·The wife receives all of the proceeds of funds held in the controlled monies account; and
·The parties do all acts and things to sell the State J property and divide the net proceeds 51% to 49% in favour of the husband after payment of all liabilities and taxes referable to the property.
I am satisfied that the proposed offer would have resulted in an outcome whereby the wife would have received approximately 49% of the parties’ property pool and the husband 51%. As noted, in the primary judgment, I determined that the wife receive an adjustment that was superior to the amount set out in her written offers to the husband.
Subsection (2A)(g) – Such other matters as the Court considers relevant
There are no additional considerations that I have determined to be relevant, other than those that I have referred to above.
Conclusion – an order for costs to be made in respect to the substantive Application
Accordingly, for the reasons set out above in respect of each of the considerations under s 117(2A) of the Act, I determine that the husband should be ordered to pay the costs of the wife incurred, in the substantive proceedings, as and from the date of the wife’s first offer of settlement, being 31 January 2018.
Consideration – costs in respect of the joinder Application
By amended Application in a Case filed on 18 October 2019, Ms K sought the following orders:
1. An order that the second respondent can join the substantive proceedings in this matter.
2. A declaration that the Applicant in the case, the second respondent in the proceedings, is the beneficial owner of the property situated at 1 & 2 G Street, City H, State J.
3. That the Applicant in the proceedings and First Respondent in the Application in the case do all acts and things necessary to transfer her title and interest in the properties situated at 1 & 2 G Street, City H, State J.
4. In the alternative to Order 1 and 2 above, That the Applicant do all acts and things necessary to transfer all her right, title and interest in the property situated at 1 & 2 G Street, City H, State J to the First Respondent and that the First Respondent enters into a deed to establish the Applicant in the Case’s life interest in the property.
5. In the alternative to Order 1, 2 and 3 above, a declaration that the Applicant and the First Respondent are holding the properties situated at 1 & 2 G Street, City H, State J on constructive trust for the Second Respondent.
6. In the alternative to Order 1, 2, 3 and 4 above, a declaration that the Applicant be granted a Life Estate in the properties situated 1 & 2 G Street, City H, State J and that she has exclusive use of the properties including the full benefit of the income earned from the properties.
7. Such further or alternate order as this Honourable Court deems fit.
8. Costs of the Application should it be opposed.
As previously noted, Ms K was unsuccessful in that Application and the wife has reached an agreement with her in respect to payment of costs in the sum of $3,000.
On 22 October 2019, the husband filed a Response to his mother’s Amended Application in a Case, in which he stated his agreeance with “Order 1 – Amended Application in a Case” and sought no further orders.
In the written submissions of the wife in respect of the joinder proceedings costs Application, she contended that:
The response to the joinder application filed by the husband supported the order sought by his mother to join the proceedings. It is submitted that the works that were required to be performed by the wife, to respond to the joinder application including attendance and representation at the hearing were necessitated not only as a result of the application filed by the husband’s mother but also as a consequence of the response filed by the husband. The application for joinder was sought by both the husband and his mother.
At paragraph 28(g) of her written submissions in respect of the joinder proceedings costs Application, the wife submitted:
…that the husband’s conduct in supporting his mother’s application was merely an attempt to frustrate and elongate the hearing and exert pressure on the wife in circumstances where there was no prospects of success and further in circumstances where the husband did not seek to adduce evidence in respect to any encumbrance that may impact upon the State J property at the final hearing.
The existence of such an ulterior motive on the part of the husband was not put to him during the course of the proceedings. Irrespective of that fact, however, it is unnecessary to make a factual finding as sought by the wife in paragraph 28(g) of those written submissions. This is because the wife has not identified any costs incurred by her which were over and above those which she incurred in responding to the joinder Application filed by Ms K. As noted, the wife has reached an agreement with Ms K that Ms K is to pay the wife’s costs so incurred by the wife in responding to that Application and Amended Application in the sum of $3,000.
That compromise was reached in circumstances where, at paragraph 15 of her written submissions, the wife notes that the costs incurred in contesting the joinder Application filed by Ms K and as supported by the husband amounted to $18,794.75. It is noted that those costs are particularised at paragraph 16 of the wife’s joinder proceedings costs Affidavit. That paragraph notes that costs incurred by the solicitor acting on behalf of the wife, in the sum of $9,472.25, are exhibited to her Affidavit at annexure F and that the fees of her counsel, in the sum of $9,322.50, are set out at annexure G of the Affidavit.
Those schedules of legal fees incurred by both the wife’s solicitor and senior counsel acting for the wife do not, however, differentiate between fees incurred as a result of the Response filed by the husband and the work involved in responding to the joinder Application filed by Ms K. It is, therefore, not possible to identify whether additional fees were incurred as a result of the Response filed by the husband.
In circumstances where the wife has reached agreement with Ms K in respect to payment of costs incurred by the wife in responding to the joinder Application filed by Ms K, it would not, in my opinion, be “just” in terms of s 117(2) of the Act to make an order that the husband pay costs over and above those that his mother has agreed to pay the wife in respect to her joinder Application, including the hearing and determination of that Application. In reaching that decision, I have had regard to the fact that I am unable to identify additional costs incurred by the wife as a result of conduct by the husband in respect to his mother’s joinder Application.
The purpose of costs is to compensate a party for costs that they have actually incurred rather than to penalise a party for the stance they took in proceedings. In I Limited & Chester (Costs) [2011] FamCAFC 51, the Full Court of the Family Court of Australia at [40] said, “An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages.” (Citations omitted)
In other words, the wife cannot be compensated for costs over and above the amount she has recovered from Ms K, in respect to the joinder Application, in circumstances where the wife has not identified that she has incurred such additional costs as a result of the conduct by the husband in filing his Response supporting Ms K’s joinder Application.
Amount of costs
Indemnity costs
The Full Court, in D & D (Costs) (No 2) (2010) FLC 93-435 at [26]-[28] (“D & D (Costs) (No 2)”), conducted a useful review of authorities dealing with the issue of indemnity costs in the following terms:
26. In Limousin & Limousin (Costs) [2007] 38 FamLR 478, the Court reviewed the authorities in relation to indemnity costs. Reference was there made to the judgment of the Full Court in Kohan and Kohan (1993) FLC 92-340. It was recorded at 79,614 (citations omitted) in which it was said that:
“The intent of s 117(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) [1983] 2 NSWLR 354]; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 358 at 368–70.
Indemnity costs orders are still an exception in this and other jurisdictions.
27. The Court in Limousin (supra) also referred to the judgment of Shephard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 upon which learned Counsel for the Wife relies in support of the present application. Shephard J said in Colgate-Palmolive (supra) (at 256):
“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...
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...
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...”
28. Reference was made to the later decision of the Full Court of Yunghanns v Yunghanns (2000) FLC 93-029 in which is [sic] was said (at 87,471, par 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.”
In Munday v Bowman (1997) FLC 92-784 at 84,660, Holden CJ drew from the decision of Sheppard J in Colgate-PalmoliveCo v Cussons Pty Ltd (1993) 118 ALR 248 in providing some examples of circumstances that might warrant the exercise of discretion to award indemnity costs as including:
(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.
More recently, in Somers & Ettridge [2020] FamCAFC 37, Strickland J at [18] confirmed that “an imprudent refusal of an offer of compromise” might, in an appropriate case, “warrant the exercise of discretion to award indemnity costs”.
In this matter, the difference in the amount that the husband would have received had he accepted the wife’s offers of settlement as compared to the outcome of the proceedings, as set out in the primary judgment, is not such that the husband’s rejection of the wife’s offers could be regarded as imprudent.
The wife, nonetheless, contends that it is appropriate for the Court to make an order for the husband to pay her costs incurred in respect to the primary proceedings on an indemnity basis. In that respect, the wife relies upon circumstances described by Harper J in Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7] as including:
(a) conduct which causes loss of time to the Court and to the other parties;
(b) the commencement or continuation of proceedings for an ulterior motive, and
(c) the commencement or continuation of proceedings and wilful disregard of known facts or clearly established law.
There is, with respect, no evidence that the husband commenced or continued the primary proceedings for an ulterior motive. While the husband was unsuccessful in respect to a number of factual contentions, it could not be said that his conduct during the course of the litigation amounted to “wilful disregard of known facts or clearly established law”.
For reasons which I have set out, I am satisfied that the husband’s conduct in respect to the proceedings and, most specifically, his failure to provide adequate disclosure, caused a loss of time to the Court and to the wife. I am not satisfied that his conduct was such that it could be characterised as conduct of an “exceptional kind” as that concept is described in D & D (Costs) (No 2) (supra).
Accordingly, I am not satisfied that it would be “just” in terms of s 117(2) to make an order for the husband to pay the wife’s costs on an indemnity basis.
Should an order be made for lump sum costs to be paid by the husband
Rule 19.18 of the Family Law Rules 2004 (“the Rules”) provides for the methods of calculating costs. These include, in r 19.18(1)(a), the Court fixing upon a specific amount for costs or, in r 19.18(1)(b), an order for the costs to be assessed on a particular basis, including for a lump sum amount.
In Stoian (supra) at [91], Kent J endorsed the principles for applying a rule equivalent to r 19.18 of the Rules as adumbrated by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9] (“Idoport v National Australia Bank”). Those principles are:
i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation…;
ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable…;
iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available…;
iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place…;
v. the gross sum “can only be fixed broadly having regard to the information before the Court”…;
…
(Citations omitted)
Consistent with those principles, it has been determined that, where a court orders a party to pay costs, it may be appropriate for the court to fix a lump sum. By doing so, the court can avoid further delay and inconvenience being occasioned by the requirement to tax a bill: Byrnes v Brisconnections Management Company Limited (No 2) [2009] FCA 1432 at [51].
At paragraph 8 of her written submissions in respect of the substantive proceedings costs Application, with reference to the substantive proceedings, the wife stated that, in the alternative to an order for indemnity costs:
The wife seeks… alternate relief, including payment of costs as a lump sum ranging from indemnity costs in the amount of $313,500 to costs in the sum of $170,000 (an amount representing 54% of the indemnity costs claimed). The wife sets out, at paragraph 12 of her affidavit filed 16 January 2020, and Exhibit E to H of that affidavit, the particulars of those costs.
As noted, the costs incurred by the wife are summarised as being as follows:
(a) An estimated $10,887 in fees paid to my former solicitor MM Lawyers. Exhibited to me and marked E is a copy of an Invoice for $4,618.00. I am making enquiries to obtain further tax invoices together with receipts for payment.
(b) $3,316.56 paid to my former lawyer KK Lawyers. Exhibited to me and marked F is a copy of the invoice and receipt relating to this payment.
(c) $60,742 paid to my former lawyer Mr JJ. Exhibited to me and marked G is a copy of his account of amounts owing which I have paid in full
invoice and receipt relating to this payment..(d) $185,755.24 paid to my solicitor Matthews Folbigg Pty Limited and $52,800 to my barrister Peter Campton. Exhibited to me and marked H is:
(i) a copy of the matter enquiry transaction report;
(ii) a copy of my Trust Statement showing these funds having been paid;
(iii) my costs notice relating to the final hearing; and
(iv) a copy of the invoice paid by me on 11 November 2019 in the sum of $52,800 to Peter Campton.
(e) my Costs Agreement dated 5 December 2016 provided to me.
The difficulty the Court has is that, leaving aside the fact that the wife is yet to clarify the result of enquiries she has made of her original solicitors, MM Lawyers, to confirm the amount of fees paid to that firm, the exhibits referred to in paragraph 12 of the wife’s substantive proceedings costs Affidavit itemise costs incurred by the wife on an indemnity basis. There is no information before the Court that enables me to make a determination or, even, an approximate estimate of an appropriate amount for the wife’s costs assessed on a party/party basis.
Specifically, to adopt the language used by Einstein J in Idoport v National Australia Bank (supra), I am not in a position where I have “sufficient confidence”, on the material available, that the amount that I would determine as an amount payable by the husband in respect to costs assessed on a party/party basis would be “logical, fair and reasonable”.
Conclusion
Accordingly, the order I make is for the husband to pay the wife’s costs in respect to the s 79 proceedings commenced by the substantive Application, as and from 31 January 2018, other than those associated with costs incurred by the wife in responding to the joinder Application filed by Ms K, as agreed between the parties or, in the absence of agreement, assessed on a party/party basis.
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice McClelland delivered on 10 August 2020.
Associate:
Date: 10 August 2020
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