Allen & Cortez (No 2)
[2016] FamCA 837
•28 September 2016
FAMILY COURT OF AUSTRALIA
| ALLEN & CORTEZ (NO. 2) | [2016] FamCA 837 |
| FAMILY LAW – COSTS – Application for costs arising out of a forum dispute – consideration as to whether s 117 or State legislation applies – held that proceedings where the court exercised its implied powers are not proceedings under the Act – costs follow the event FAMILY LAW – COSTS – Indemnity costs – principles for making an award of costs on an indemnity basis considered |
| Civil Procedure Act 2010 (Vic) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Supreme Court Act 1986 (Vic) Supreme Court (General Civil Procedure) Rules 2015 (Vic) |
| Browne & Green [2002] FamCA 791; (2002) FLC 93-115 Chen & Tan (No 2) [2012] FamCA 796 I & I (No 2) (1995) FLC 92-625 Kelly and Kelly (No 2) (1981) FLC 91-108 Kohan & Kohan (1993) FLC 92-340 Mallett v Mallett (1984) 156 CLR 605 Marinko & Marinko (1983) FLC 91-307 Markoska & Markoska and Anor (Costs) [2011] FamCA 8303 Sahin v National Australia Bank Ltd [2013] VSCA 93 Skinner & Alfonso-Skinner (Costs) [2010] FamCA 1108 Yeo & Huy (Costs) [2012] FamCA 758 White & White (1982) FLC 91-246 |
| APPLICANT: | Mr Allen |
| RESPONDENT: | Ms Cortez |
| FILE NUMBER: | MLC | 7415 | of | 2014 |
| DATE DELIVERED: | 28 September 2016 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Macmillan J |
| HEARING DATE: | By way of written submissions |
WRITTEN SUBMISSIONS RECEIVED FROM
| SOLICITOR FOR THE APPLICANT: | Clancy & Triado |
| SOLICITOR FOR THE RESPONDENT: | Kennedy Partners |
Orders
IT IS ORDERED THAT
The wife pay the husband’s costs of and incidental to her Amended Application in a Case filed 25 February 2016 and the husband’s Amended Response to an Application in a Case filed 10 March 2016, to be agreed and in default of agreement to be as assessed on a party/party basis.
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 Allen & Cortez (No.2) 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 MELBOURNE |
FILE NUMBER: MLC 7415 of 2014
| Mr Allen |
Applicant
And
| Ms Cortez |
Respondent
REASONS FOR JUDGMENT
On 6 May 2016 I made orders dismissing the wife’s application for a stay of property proceedings between the parties in this Court and acceded to the husband’s application that the wife be restrained by injunction from commencing or continuing any matrimonial proceedings in any other jurisdiction, including the State of California in the United States of America. (“the substantive proceedings”).
On that date I also made orders reserving the question of the costs of and incidental to the substantive proceedings and made directions for the filing of written submissions in support of any application with respect to the costs of those proceedings.
On 30 May 2016 the husband filed submissions seeking an order that the wife pay his costs of and incidental to the substantive proceedings on an indemnity basis. In the alternative the husband seeks an order that the wife pay his costs on a client/lawyer basis or if not on a client/lawyer basis on a party/party basis. In relation to quantum, it is submitted by the husband that the amount payable by the wife should be agreed between the parties and, failing agreement, to be determined pursuant to a taxation of costs.
On 10 June 2016 the wife, in accordance with my orders made on 6 May 2016, filed a response to the submissions of the husband. The wife’s primary position is that she opposes the Court making any order for costs against her. In the alternative, the wife seeks that the husband’s application for costs be adjourned to await the final determination of the matter or that in the event that the Court determines that it should make an order for costs that those costs be payable on a party/party basis and that payment be stayed until the final hearing.
Legal Principles
The general rule in proceedings in this Court pursuant to the Family Law Act 1975 (Cth) (“the Act”) is that subject to the provisions of s 117(2) of the Act the parties to those proceedings shall bear their own costs of those proceedings.
Section 117(2) of the Act provides that if the court is of the opinion that there are circumstances that justify it doing so the court may, subject to subsections (2A), (4), (4A) and (5) and the Family Law Rules 2004 (Cth) (“the Rules”), may make such order for costs as it considers just.
In considering what if any order should be made the court must have regard to the following matters set out in s 117(2A) of the Act:
(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.
The matters in s 117(2A) of the Act “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 Full Court in I & I (No 2) (1995) FLC 92-625).
It is submitted by the husband that in this case, having regard to the matters in s 117(2A) of the Act, there are circumstances which would justify the Court making an order for costs.
Does s 117 of the Act Apply in this Case
It is submitted by the wife that the Court in this case was exercising its implied powers not its statutory powers and that in those circumstances, the substantive proceedings not being a proceeding pursuant to the Act, s 117 of the Act is not applicable.[1]
[1] Costs submissions on behalf of the respondent wife filed 10 June 2016, paragraph 6.
The wife relied upon the decisions of Murphy J in Skinner & Alfonso-Skinner (Costs) [2010] FamCA 1108 and Yeo & Huy (Costs) [2012] FamCA 758 and the decision of Kent J in Chen & Tan (No 2) [2012] FamCA 796 in support of her submission that s 117 of the Act is not applicable to the substantive proceedings. In each of the cases relied upon the Court was similarly dealing with an application for costs arising out of a dispute as to forum.
At paragraph 12 of Chen & Tan (No 2) (supra), Kent J said:
… I do not find that the mere fact that the forum dispute concerned the potential staying of proceedings commenced under the Act renders the interim hearing conducted before me in this matter a ‘proceeding under the Act’. Proceedings which dispute as to whether Australia is a clearly inappropriate forum are not regulated by the Act; rather, they arise either as part of this Court’s equitable accrued jurisdiction or its inherent jurisdiction as a Court of superior record to regulate the proceedings before it.
I accept counsel for the wife’s submissions that the power to make an order for costs in this case is not found in s 117 of the Act as submitted by the husband.
I also accept the wife’s submission, as was accepted by the court in each of the three cases upon which she relied, that where there is no applicable Commonwealth legislation as to the procedure in a particular case, the court exercising federal jurisdiction is bound by the applicable State legislation. In this case it is the Supreme Court Act 1986 (Vic) and the Civil Procedure Act 2010 (Vic) which confer power, in these circumstances, upon this Court to make orders in relation to costs. That power is discretionary.
Notwithstanding that the court has a discretion as to whether or not it should make an order for costs, the normal course is that costs will follow the event unless there are good reasons why such an order should not be made (Sahin v National Australia Bank Ltd [2013] VSCA 93).
As submitted by counsel for the wife both Murphy JJ in Yeo & Huy (Costs) (supra) and Kent J in Chen & Tan (No 2) (supra) concluded that whilst the matters in ss 117(2A) of the Act would not determine how the court should exercise its discretion they might inform that exercise of discretion. It was on this basis and in order to address the submissions made on behalf of the husband that counsel for the wife addressed the matters in s 117(2A) of the Act.
Discussion
The husband submits that a costs order is justified having regard to s 117(2A) of the Act and in particular the following:
·the financial circumstances of the parties;
·the wife’s conduct in the proceedings;
·the wife’s failure to comply with previous orders of both the Family Court of Australia and the Superior Court of California;
·that the wife has been wholly unsuccessful in her application; and
·the wife’s unreasonable refusal to accept offers of settlement made by the husband to resolve her application.
Section 117(2A)(a) of the Act the financial circumstances of each of the parties to the proceedings
It is submitted on behalf of the husband that the wife has the capacity to meet a costs order against her. The net asset pool of the parties is estimated to be somewhere in the range of approximately $30.8 to $32 million.[2] The husband at paragraph 8 of his submissions points towards each of the parties controlling “significant assets” and references paragraph 58 of my Reasons for Judgment delivered on 6 May 2016 (“the Reasons for Judgment”) where I noted the wife’s own evidence that she holds US$4,900,000 in an account in her own name.
[2] Costs submissions on behalf of the respondent wife filed 10 June 2016, paragraph 29; Applicant’s husband’s costs submissions filed 30 May 2016, paragraph 7.
The wife for her part points towards the disparity between the parties’ respective positions. At paragraph 29 of her submissions she asserts that the husband has control of about 72 per cent of the net assets (being $22,238,000 on her case of a total net asset pool of around $30.8 million) while she controls about 28 per cent of the net assets (being $8,598,853). Counsel for the wife also relied upon the disparity in the parties’ income, the husband’s income on his case being at least five times greater than that of the wife.
Counsel for the wife referred to a number of decisions where a disparity in the financial circumstances of the parties was recognised as being a matter which would justify an order for costs (Kelly and Kelly (No 2) (1981) FLC 91-108; Marinko & Marinko (1983) FLC 91-307 and Mallett v Mallett (1984) 156 CLR 605). The wife’s case being that it might similarly be a reason why a costs order might not be justified.
The Full Court in Browne & Green [2002] FamCA 791; (2002) FLC 93-115 said at paragraph 29 as follows:
In some cases the financial disparity between the parties has been critical in the determination of the exercise of the costs discretion. In other cases it has been said to be of little relevance. Thus in JEL and DDF (No 2) (2001) FLC 93-083; 28 FLR 119 although the husband had $30 million more than the wife by way of assets, the fact that the wife had $11 million of her own was seen as sufficient to justify a costs order even though there was a huge disparity in favour of the husband. Earlier in Mallet (1984) 156 CLR 605; FLC 91-507; 9 Fam LR 449, even though the husband was more successful than the wife in the proceedings, the financial disparity between the parties (the wife received $260,000 and the husband about $420,000) led the trial Judge to make an order for part of the wife’s costs against the husband, which order the Full Court and the High Court considered was a proper exercise of discretion.
On both the wife’s case and the husband’s case the husband is presently in control of a significantly larger proportion of the parties’ assets however I do not consider that the financial disparity between the parties in this case would militate against an order in favour of the husband.
The wife also submitted that in circumstances where the position with respect to the parties’ taxation liabilities in the United States of America is uncertain and that such taxation liabilities may be a significant impost upon the parties’ assets and the wife’s capacity to meet any order for costs the Court might make, the Court should adjourn the cost application to await the outcome of the case or at the very least not make an order until the taxation liabilities have been quantified. Whether one accepts the husband’s evidence or the wife’s evidence the parties have significant net assets, on the husband’s case approximately AUD$32 million and on the wife’s case approximately AUD$31 million. In all of the circumstances I am not satisfied that the as yet unquantified tax liabilities and any associated penalties the parties may be required to meet and how that ultimately impacts upon the parties’ respective entitlements would preclude the Court from making an order for costs as sought by the husband prior to these taxation liabilities being quantified.
Section 117(2A)(c) of the Act 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
It was submitted by the husband that the wife’s conduct in relation to these proceedings justified the Court making an order for costs. He relied in summary upon the following conduct that:
·the wife’s filing of the Petition for Recognition of Foreign Dissolution in the Superior Court of California, County of B Family Division (“the Californian Court”) and the subsequent filing of her stay application in this Court some 15 months after the husband commenced proceedings was vexatious and oppressive;
·the wife abused the processes of the Californian Court;
·the wife gave false and/or misleading evidence to this Court; and
·the wife attempted to create issues and dispute with respect to the value of the properties in the United States, her United States Investments and the United States tax liability.
Counsel for the wife submitted by way of reply, in my view correctly, that it is the wife’s conduct with respect to the proceedings in this Court to which the Court must have regard. Apart from highlighting the obvious issue with the application of s 117 of the Act in circumstances where I am satisfied that the Court was not exercising its statutory powers, even if it had been, the proceedings in California are certainly not proceedings in which this Court is exercising its powers and are not relevant for the purposes of assessing the wife’s conduct in these proceedings. Similarly whether the wife may or may not have abused the processes of the Californian Court, even if I had found that to be the case and I did not, is in my view not relevant.
In my view the submission made on behalf of the husband to the effect that the wife has given false or misleading evidence must be considered in the context of a case in which the evidence has not been tested and as a consequence of which there are no findings that the wife has given false or misleading evidence.
Finally the husband submitted that the wife had created issues in order to advance her case. Although I did not accede to the wife’s application for a stay that was not because I found that the wife had created issues where none existed. Rather it was a matter of the Court applying the “clearly inappropriate forum test” to the particular circumstances of this case and in the exercise of its discretion weighing up the relevant considerations, including “the issues on which relief might depend in each of the jurisdictions”.[3]
Section 117(2A)(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
[3] Skinner & Alfonso-Skinner [2010] FamCA 329, paragraph 69.
The husband submitted that:
·the wife had failed to comply with orders made on 10 July 2015 requiring her to file an Amended Response to Initiating Application by 29 July 2015;
·the wife failed to comply with the notation to orders made on 15 August 2016 to the effect that the parties intended to convene a settlement conference or conference in October or November 2015;
·the wife failed to comply with the notation to the orders made 7 December 2015 to the effect that the parties agreed to take no further steps in their respective Californian proceedings on the basis that the question of forum should be determined in Australia; and
·the wife failed to comply with orders made by the Californian Court on 14 January 2016
The wife submitted and I accept her submission that the substantive proceedings were not necessitated by the wife’s failure to file her Amended Response.
The husband’s submission with respect to the wife’s failure to comply with the notations to the orders in my view misconstrues the nature and effect of those notations and ignores the clear wording and intention of the relevant sub-section. I accept the wife’s submission that a notation is a statement of intention and not an order and is not capable of enforcement even if a party fails to act in accordance with a notation.
I also accept the wife’s submission that her failure to comply with an order of the Superior Court of California is similarly not a relevant consideration pursuant to s 117(2A)(d) of the Act. Those proceedings are not proceedings in this Court pursuant to the Act.
Section 117(2A)(e) of the Act whether any party to the proceedings has been wholly unsuccessful in the proceedings
The wife concedes that she has been wholly unsuccessful both in relation to her application for a stay and in opposing the anti-suit injunction sought by the husband.
Section 117(2A)(f) of the Act 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 by letter from her solicitors to the husband’s solicitors dated 22 February 2016 did offer to settle the substantive proceedings however as the husband had already incurred significant costs arising out of those proceedings and as, the husband submitted, that offer did not prevent the wife continuing or commencing further proceedings in California or any other jurisdiction, the wife’s offer was rejected.
The husband also offered to settle the substantive proceedings on the basis that the wife withdraw the substantive proceedings and be restrained from commencing or continuing any matrimonial proceedings in another jurisdiction. That offer, which was made by the husband by letter dated 23 February 2016, a month prior to the hearing, was rejected by the wife it is submitted because it included orders in relation to the proceedings in California which would not and were not made by the Court in this case.
The husband repeated his offer on 3 March 2016 omitting those paragraphs relating to the Californian proceedings seeking a response by close of business on 7 March 2016 which it is submitted on behalf of the wife did not give the wife reasonable time to consider that offer. I do not accept that the wife did not have sufficient time to consider the husband’s second offer which was substantially in the same terms as his first offer and which was sent to the wife by letter dated 23 February 2016. There is also no evidence to suggest that the wife asked for additional time to consider the offer, to the contrary it is not disputed that she did not respond to the husband’s second offer by the date specified or otherwise.
Conclusion
The overarching consideration in this case is that the wife was wholly unsuccessful. In my view none of the other considerations in s 117(2A) of the Act to the extent that they are relevant lead me to conclude that costs in this case should not follow the event. Regulation 63.03(2) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides that costs “which a party is required to pay under any of these Rules or an order of the Court shall, unless the Court otherwise orders, be paid forthwith”. I am not satisfied that there is any reason why the Court should await the outcome of the hearing before making an order for costs with respect to a discrete issue such as the issue in this case or why those costs as ordered should not be payable forthwith.
Indemnity Costs
There is no dispute that despite the general rule that costs be paid on a party/party basis the court has the discretion in certain circumstances to make an order for the payment of costs on an indemnity basis. There is also no dispute that 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” (Kohan & Kohan (1993) FLC 92-340, page 79,614).
Although I propose to accede to the husband’s application that the wife pay his costs of and incidental to the wife’s Amended Application in a Case filed 25 February 2016 and his Amended Response to an Application in a Case filed 10 March 2016, I do not propose to do so either on an indemnity or lawyer/client basis.
In Colgate–Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Sheppard J observed that there should be some “special or unusual feature in the case to justify the Court in departing from the ordinary practice”. His Honour, in summary, gave the following examples:
·the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
·misconduct that causes loss of time to the Court and to other parties;
·proceedings commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
·the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;
·an imprudent refusal of an offer to compromise; and
·an award of costs on an indemnity basis against a contemnor.
Although arguably in hindsight it may have been imprudent for the wife to ignore the husband’s offer of settlement, in my view it cannot be said that she did not have a case to argue, that her case had no chance of success and further there is no evidence based upon which I could conclude that she had an ulterior motive. Nor am I satisfied as previously discussed that she made false or irrelevant allegations.
Although there is no dispute that the circumstances which might lead the Court to exercise its discretion to award costs on an indemnity basis are not closed, in this case no other circumstances were identified which in my view would justify such an order.
Significantly in this case none of the matters upon which the husband seeks to rely in support of his application that costs be payable on an indemnity basis are in my view of the “exceptional kind” that would justify the Court making an order for indemnity costs. In all of the circumstances I propose to order that the wife pay the husband’s costs, to be agreed and in default of agreement, to be assessed on a party/party basis.
I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 28 September 2016.
Associate:
Date: 28 September 2016
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