Arman & Arman
[2009] FamCA 8
•19 January 2009
FAMILY COURT OF AUSTRALIA
| ARMAN & ARMAN | [2009] FamCA 8 |
| FAMILY LAW – COSTS – Indemnity costs sought where husband mostly unsuccessful in parenting and property matter |
| Family Law Act 1975 (Cth) |
| Penfold v Penfold (1980) FLC 90-800 Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225 J-Corp Pty Limited v Australian Builders Labourers Federation Union of Workers - Western Australian Branch, (Federal Court of Australia, 19 February 1993, unreported) Munday & Bowman (1997) 92-784 LGM & CAM [2008] FamCAFC 1 Kohan and Kohan (1993) FLC 92-340 |
| APPLICANT: | Ms Arman |
| RESPONDENT: | Mr Arman |
| FILE NUMBER: | MLC | 3450 | of | 2007 |
| DATE DELIVERED: | 19 January 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | THE HONOURABLE JUSTICE CRONIN |
| HEARING DATE: | 19 JANUARY 2009 |
SUBMISSIONS RECEIVED FROM:
| SOLICITOR FOR THE APPLICANT: | HARWOOD ANDREWS LAWYERS |
Orders
That the husband pay one half of the wife’s costs relating to the property and parenting proceedings from the conclusion of the case assessment conference determined according to the schedule to the Family Law Rules 2004 by agreement and in default of agreement, as may be assessed by a registrar.
That for the purposes of paragraphs 17 to 20 of the orders made 31 October 2008, the costs due to the wife pursuant to paragraph 1 hereof shall be paid from the husband’s entitlement.
Pending written agreement or further order of the Court on any assessment as to the sum of costs due to the wife under paragraph 1 of these orders, no payment shall be made to the husband and his entitlement shall be held in an interest-bearing account by the legal practitioners responsible for the sale of the B Street property.
IT IS NOTED that publication of this judgment under the pseudonym Arman & Arman is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 3450 of 2007
| MS ARMAN |
Applicant
And
| MR ARMAN |
Respondent
REASONS FOR JUDGMENT
On 31 October 2008 after a contested hearing in relation to parenting and property matters, I made orders and delivered reasons for judgement.
In paragraph 28 of the orders, I said:
Any and all questions of costs arising out of these orders are reserved to be determined on written submissions. If any party desires to make such a submission, it shall be filed with my Associate and served on any other party by 4 pm on 14 November 2008 and any reply thereto shall be similarly filed and served by 4 pm on 21 November 2008.
On 14 November 2008, the practitioners for the wife filed written submissions and sought orders for costs.
By 4 pm on 14 November 2008, the husband had not filed any response to the wife’s submissions nor sought any orders himself. On 7 November 2008, by notice dated 5 November 2008, the husband’s solicitors ceased to act for him. They had acted for him throughout the final hearing which lasted over a number of days.
Despite the orders having been made on 31 October, there were (and have been) constant problems requiring further orders of 17 November and 17 December. In respect of the former, the husband appeared before me unrepresented but in respect of the latter, he had engaged solicitors who in turn briefed experienced counsel.
Because of the husband’s lack of representation until the hearing on 17 December, I extended the time for filing of any documents he wanted me to consider for the purposes of paragraph 28 of the October orders. Thus, on 17 December 2008, I extended the time for the husband until 4 pm on 15 January 2009. In a subsequent hearing on 7 January 2009, the husband appeared represented by his solicitor in relation to issues arising out of the dispute with his former solicitors. No mention was made of any difficulty about the filing of the costs submissions.
Despite the extension of time, no submission was received from the husband. He has had sufficient time to be heard. I am therefore proceeding on the wife’s application.
By the final orders made on 31 October, I dealt with both parenting and property issues. In relation to the parenting orders, I limited the amount of time that the husband could spend with his two children. I shall not set out the reasoning behind that. However, the parties strongly disagreed with each other’s proposals. That was the way the proceedings were conducted. The husband wanted not only equal shared parental responsibility but also a shared time arrangement. I found that that was not in the best interests of these children. In particular, the evidence and particularly the expert evidence, was overwhelmingly against shared care occurring.
In relation to property matters, there was a dispute between the parties about their respective contributions and their future economic circumstances. The husband’s position was that he wanted an equal division and the wife wanted a share greater than half. I found that the position of the husband was untenable. The wife’s proposed orders were closer to the reality.
Thus, in terms of the outcome, it must be seen that the wife was largely successful and the husband almost entirely unsuccessful.
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the principle that each party shall pay their own costs. The exception to that rule is where the court finds that there is a justification for departing from the principle.
In Penfold v Penfold (1980) FLC 90-800 in the joint judgment of Stephen, Mason, Aicken and Wilson JJ it was said at 75,053:
It is an accurate description of s 117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s 117(2). As sub-sec (1) is expressed to be subject to sub-sec (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.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.
Counsel for the wife submitted:
(a)the husband had persisted with his application in the face of recommendations in a family report;
(b)the husband had disregarded orders made in early 2007 both as to approaching the wife and the consumption of alcohol;
(c)various interim applications about children’s issues were “the result of the husband’s actions”; and
(d)in respect of property matters, he must have known that his proposals were “doomed”.
I have already said that the husband’s position in respect of the property matters was untenable. Whether or not he knew that his proposed orders were “doomed to fail” is not to the point. His application could not have been sustained on the evidence that he was presenting. To conduct the proceeding on that basis meant that the wife was obliged to follow along in litigation that was unnecessary.
It was also evident that the parenting orders sought by the husband were improbable if the evidence of the expert witness was accepted. The parties had had two reports from the expert and the husband’s desired position was never one that found attraction with the expert. In addition, the husband’s attitude to parenting and to the wife also indicated that he had little regard for her as a parent. To expect a co-operative parenting arrangement such as that pursued by the husband was unrealistic in the circumstances. That is not to say he should not have had the opportunity to test the expert evidence and also that of the wife in relation to the parenting issues but his attitude to the wife and his view about what was good for the children was immovable. I did not accept his evidence on the matter.
It is also important to point out that costs are not intended as some form of punishment for litigating but rather to act as a compensation for the party who has had to participate when they probably ought not to have been there.
In determining what (if any) order should then be made for costs, a court must take into account the matters set out in s 117(2A). That provides:
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.
Neither party is in a strong financial position. The assets are modest and neither party has any income of substance. I am very conscious that in making an order for costs in proceedings such as this, the entitlement of the husband to share in the pool of assets will be further diminished. However, I am also conscious that the wife had to proceed with the litigation to achieve what I found ultimately to be a just and equitable outcome. It is therefore a balancing question.
I am told that neither party was the recipient of legal aid. In a case involving a small amount of equity, the absence of any form of outside funding assistance creates more than usual pressure on the party who has to continue with the litigation unnecessarily.
I take into account the conduct of the husband in not complying with previous orders but that alone would not justify an order for costs of the final hearing. The wife had to deal with significant portions of an affidavit that were either inadmissible and/or related to matters that were not proceeded with. For example, evidence was led that there was a conflict of interest in relation to the wife’s lawyers but that issue was abandoned at the start of the case. The trial affidavit of the husband will be seen to have significant portions crossed out as being either irrelevant or not admissible or both. Those are matters relevant to the exercise of discretion guided by the provision in s 117(2A)(c).
I have already commented upon the fact that the husband had not complied with orders and the importance of that was that time was taken up during the final hearing on whether those things had occurred or not. The husband for example, adopted the position that he did not understand the interim orders but I did not accept that. The time therefore unnecessarily taken is a matter relevant to the justification for making an order but also to the quantum of costs.
Whilst the husband has not been wholly unsuccessful, it is obvious that he has been much less successful than his desired position or that adopted by the wife.
I have not been provided with any evidence of any written offers as described in s 117(2A)(f).
Although I am entitled to take into account other matters that may be relevant, I do not take into account the disputes between the parties subsequent to the orders on the basis that although they may affect the financial circumstances of both husband and wife, they are matters that can be more properly addressed in those proceedings.
There are therefore circumstances in this is a case which justify the making of an order for costs.
Any order for costs is also discretionary as to the amount. In this case, there was little justification in the husband proceeding with the property proceedings as he did. He should therefore make a contribution towards the wife’s costs relating to the property issues from the conclusion of, but not including, the case assessment conference.
The parenting case was different to the property matter. As I have said, there were some issues that needed to be canvassed. I do find however that subsequent to the receipt of the final family report, there could be little justification in proceeding other than to test the expert evidence. Little was achieved by that exercise. That meant that the wife was put to the expense of conducting a trial in which she was not challenging that evidence. In those circumstances, the husband should contribute towards the wife’s costs of the parenting proceedings. The husband should not be entirely responsible for those costs because the wife needed to obtain orders and there were at least some questions about the appropriateness of the orders that she sought.
It would be difficult and extremely time-consuming to expect these parties to reach agreement on the issue of costs if orders were made splitting the question into two parts. There is no co-operation between the parties and I am conscious of their limited resources. As I do not know the precise details of what costs the wife has incurred or how those costs are structured, the only sensible solution is for there to be an assessment and for me to fix a percentage contribution by the husband.
In my view, the husband should pay one half of all of the wife’s costs associated with both the parenting and property issues from the conclusion of the case assessment conference on an assessment basis in default of agreement.
However, that is not the end of the matter as the wife’s submissions were that costs should be awarded upon an indemnity basis.
This Court has often adopted the principles set out in Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225. In that case, Sheppard J made a pertinent observation about the court-endorsed costs structure of litigation in the Federal Court of Australia which, to a very large degree, is the same philosophy in this Court. It will be seen from this Court’s rules that if a party wants to depart from the court-approved costs structure, there is a requirement for a strict adherence to rules relating to contracting-out. Sheppard J said:
For present purposes it is enough to say that the position is as it is because members of the profession, both solicitors and counsel, and also professional witnesses, have refused to accept as a proper or sufficient guide to their costs and fees the provisions of scales of costs and charges provided for in schedules … Taxing officers have been obliged to tax bills on the basis of the Rules and the Schedule. The fact that the scales themselves provide ranges of fees or charges for various items depending on degrees of difficulty, levels of responsibility and time involved, has not overcome the practical problem which exists.
Thus, if a Court is going to depart from the schedules and order indemnity costs, it is important to compare them. Having said that, part of the dilemma is that it is the wife who is also paying the sort of costs about which Sheppard J was concerned. In this case however, apart from knowing what the wife incurred because of the discussions with counsel at the commencement of the case, I do not now know exactly what her current costs position is.
Sheppard J went on to quote French J (as he then was) in J-Corp Pty Limited v Australian Builders Labourers Federation Union of Workers - Western Australian Branch, (Federal Court of Australia, 19 February 1993, unreported) where his Honour in a case which he described as “paper thin” said:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the
discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.Whilst what his Honour said in J-Corp might be said of a property case where the evidence was “paper thin” in arguing matters knowing the discretionary elements of s.79 of the Act, I do not accept that the same principle necessarily follows in relation to a parenting matter. In many cases, parents need to participate in proceedings because, even though they have an “expert” against them, their own view about what is good for the children still needs to be ventilated because on any view, they are going to be parents for many years to come.
Sheppard J went on to set out some examples of where indemnity costs should be contemplated. In summary, his Honour considered so far as they are relevant here, inter alia:
i)In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
ii)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.
iii)(Cases involving) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud.
iv)Evidence of particular misconduct that causes loss of time to the Court and to other parties.
v)The fact that the proceedings were commenced or continued for some ulterior motive.
vi)The making of allegations which ought never to have been
made or the undue prolongation of a case by groundless
contentions.vii)An imprudent refusal of an offer to compromise.
His Honour said that:
The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
Counsel for the wife picked much of what was said by Holden CJ in Munday & Bowman (1997) 92-784 at p 84,660 when the Chief Judge adopted the sentiments of Sheppard J.
In the recent Full Court decision of LGM & CAM [2008] FamCAFC 1, the Court referred to what was said in Kohan and Kohan (1993) FLC 92-340 at 79,611 where their Honours said:
…We are of the opinion that in an appropriate case, the Court has a discretion to order costs on an indemnity basis and that such costs may be ordered, where they have been incurred under a costs agreement which departs from the usual scale of costs. However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure form the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
Indemnity costs in parenting cases must also be far more difficult to obtain since the 2006 amendments to the Act because under Division 12A, the Court is obliged to determine the course of the proceedings including the evidence to be led and the strength and breadth of cross-examination.
Thus, indemnity costs orders in a parenting case should be reserved for cases where the conduct of a party is anything but child-focussed, is calculated to cause emotional harm to the other parent or where there could be no justification for the orders sought or for that matter, the conduct of the litigation itself.
In civil jurisdictions, expressions about collateral purposes, ulterior motives and fraud are often discussed. Parenting cases are different. Since 2006, apart from the provisions of Division 12A, the Act has contained s. 117AB which reads:
(1) This section applies if:
(a)proceedings under this Act are brought before a court; and
(b)the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
(2)The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.
It will be seen therefore that the Act now has several provisions which should be contemplated carefully before resorting to the making of an order for indemnity costs.
There is no material in the submission of the wife to suggest that I ought to exercise the powers in s 117 AB.
There is nothing in the conduct of the husband that would warrant me making an indemnity costs order as a result of what occurred during the hearing.
As such, I cannot find that there are any special or indeed unusual matters or facts in this case that would give rise to a finding that there were exceptional features of the case that would in turn justify a departure from the ordinary practice in relation to the payment of costs.
In my view, it would not be appropriate to make an order for indemnity costs.
I certify that the preceding Forty Six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 19 January 2009
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