Armington and Armington & Ors (No. 3)
[2020] FamCA 765
•16 September 2020
FAMILY COURT OF AUSTRALIA
| ARMINGTON & ARMINGTON AND ORS (NO. 3) | [2020] FamCA 765 |
| FAMILY LAW – COSTS – indemnity costs sought by applicant following first respondent’s unsuccessful second attempt to obtain orders discharging a litigation funding order – previously held that the second application was opportunistic in Armington & Armington [2020] FamCA 751 – held, indemnity costs payable. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 19.18(1) Statute of Gloucester 1278, 6 Edw 1 |
| Addison & Leahy [2008] FamCA 248 Andrews v Barnes (1888) 39 Ch D 133 Armington & Armington [2020] FamCA 751 Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 Bacall & Zagar (No. 2) [2020] FamCA 598 Brott v Grey [2000] FCA 1836 Burrell v R (2008) 238 CLR 218 Cachia & Hanes (1994) 179 CLR 403 Christie v Christie (1873) LR 8 Ch App 499 Colgate–Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425 Corporation of Burford v Lenthall [1743] 26 ER 731 Cummings v Lewis & Ors (1993) 41 FCR 559 Degman Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 Forester v Read (1870) LR 6 Ch App 40 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Garnet v Bradley (1878) 3 AC 944 Goodridge & Beadle (No 2) [2019] FamCA 786 Gordon & Gordon(No 2) [2018] FCCA 1617 Gordon & Gordon [2017] FCCA 2899 Greedy & Greedy (1982) 8 Fam LR 669 Harlen & Hellyar (No 2) [2020] FamCA 413 Hearl & Digby [2020] FamCA 474 Helljay v Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 74 ALJR 68 Horne (in his capacity as trustee of the bankrupt estate of Narain) v Narain [2017] FCCA 1190 Howes v Barber (1852) 18 QB 588 Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 In the Marriage of Hogan (1986) 10 Fam LR 681 In the Marriage of Kohan (1992) 16 Fam LR 245 In the Marriage of Oriolo & Oriolo (1985) 10 Fam LR 665 In the Marriage ofRobinson and Higginbotham (1991) 14 Fam LR 559 In the Marriage of Tuck (1979) 7 Fam LR 492 In the Marriage of Wilson (1980) 6 Fam LR 566 In the Marriage of Wilson (1989) 13 Fam LR 205 Jones v Coxeter [1742] 26 ER 642 Knight v F.P. Special Assets Ltd (1992) 174 CLR 178 Latoudis v Casey (1990) 170 CLR 534 Mansfield & Mansfield [2019] FamCAFC 186 McKewins Hairdressing & Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation (2000) 74 ALJR 1000 Medlon & Medlon (No 6) (2015) 54 Fam LR 1 Mordue v Palmer (1870) LR 6 Ch App 22 Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 Northern Territory v Sangare (2019) 265 CLR 164 Norton v Morphett (1995) 83 A Crim R 90 NSW Medical Defence Union Ltd v Crawford & Bailey (1993) 31 NSWLR 469 PBF & TRF (2005) 33 Fam LR 123 PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 Penfold v Penfold (1980) 144 CLR 311 Pirrotta v Citibank Ltd (1998) 72 SASR 259 Prantage & Prantage (2013) 49 Fam LR 197 Re JJT; ex parte Victoria Legal Aid (1998) 195 CLR 184 Re National Safety Council of Australia, Victorian Division (in liq) (No 2) [1992] 1 VR 485 Re Principal Strategic Options Pty Ltd; Coshott v Coshott [2001] FCA 664 Re Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187 Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Ruhani v Director of Police (2005) 222 CLR 489 Scherer v Counting Instruments Ltd [1986] 1 WLR 615 Stephens v Stephens (Enforcement) (Costs) (2010) 44 Fam LR 117 Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331 Yeo & Rambaldi (as trustees of the bankrupt estate of Arifovic) v Arifovic & Anor (No.2) [2017] FCCA 1189 Yunghannsv Yunghanns (2000) 26 Fam LR 331 |
| APPLICANT: | Ms Armington |
| FIRST RESPONDENT: | Mr Armington |
| SECOND RESPONDENT: | Company A Pty Ltd (ACN …) |
| THIRD RESPONDENT: | Company B Pty Ltd (ACN …) |
| FOURTH RESPONDENT: | Company C Pty Ltd (ACN …) |
| |
| |
| SEVENTH RESPONDENT: | Company K2 Pty Ltd (Formerly Company K Pty Ltd) |
| FILE NUMBER: | MLC | 1627 | of | 2016 |
| DATE DELIVERED: | 16 September 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Wilson J |
| DATE OF LAST SUBMISSION: | 9 September 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms S. Mariole |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| FIRST RESPONDENT: | In Person |
| ON BEHALF OF THE SECOND RESPONDENT: | Mr V Armington |
| ON BEHALF OF THE THIRD RESPONDENT: | Mr V Armington |
| ON BEHALF OF THE FOURTH RESPONDENT: | Mr V Armington |
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| |
| |
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| ON BEHALF OF THE SEVENTH RESPONDENT: | Mr Armington |
Orders
The first respondent must pay the applicant’s costs of and incidental to the applicant’s application on an indemnity basis in the sum of $7,412.60.
The first respondent must make that payment within 60 days.
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 Armington & Armington 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 1627 of 2016
| Ms Armington |
Applicant
| Mr Armington |
First Respondent
And
| Company A Pty Ltd (ACN …) |
Second Respondent
And
| Company B Pty Ltd (ACN …) |
Third Respondent
And
| Company C Pty Ltd (ACN …) |
Fourth Respondent
And
| |
Fifth Respondent
And
| |
Sixth Respondent
And
| Company K2 Pty Ltd (Formerly Company K Pty Ltd) |
Seventh Respondent
REASONS FOR JUDGMENT
These reasons address the applicant’s application for costs to be assessed on indemnity basis of and incidental to the first respondent’s application to be released from the dollar-for-dollar costs regime ordered by her Honour Judge Kirton.
For the reasons given last Friday in Armington & Armington (No. 2)[1] I dismissed the first respondent’s application. In paragraph 39 I held as follows –
In my view, this application before me was opportunistic. It should not have been brought. I dismiss it.
[1] [2020] FamCA 751.
For the purposes of s 117(2A)(e) of the Family Law Act, the husband’s application was wholly unsuccessful. The question then became whether the applicant thereby became entitled to an order that the first respondent pay the wife’s indemnity costs in the sum sought of $7,412.60.
For the reasons that follow I am of the view that an order under s 117(2) of the Family Law Act requiring the first respondent to pay the applicant her costs on an indemnity basis is appropriate and I so order.
Costs in this court
As has previously been held, in Cachia & Hanes[2] the plurality of the High Court held that it has not been doubted since 1278 when the Statute of Gloucester of the United Kingdom introduced the notion of costs to the common law that costs are awarded as a partial indemnity for professional legal costs actually incurred in the conduct of litigation. In Knight & FP Special Assets Ltd[3] the High Court contrasted the common law position with respect to costs with a position in equity. I surveyed the learning on point in Goodridge & Beadle (No. 2).[4]
[2] (1994) 179 CLR 403.
[3] (1992) 174 CLR 178.
[4] [2019] FamCA 786.
The history of the making of costs orders at common law from the 1700s commencing with the judgment of Lord Blackburn in Garnet v Bradley[5] was surveyed by the plurality of the High Court in Knight v F.P. Special Assets Ltd.[6] There, the High Court contrasted the position at common law in respect of costs orders with the position in equity. Two early illustrations of equity’s treatment of costs warrant particular consideration. The first was Jones & Coxeter.[7] In that case the Lord Chancellor held that the award of costs was entirely discretionary and could be ordered at the time of the decree, unlike at common law where an order for costs had to await final judgment. The discretionary nature of costs in equity lay in its attachment to the conscience as Lord Hardwicke LC held in Corporation of Burford v Lenthall.[8] The second important early exposition of costs in equity was the decision in Andrews v Barnes.[9] There, the court held that equity’s power to order costs arose from the general and inherent power of the Lord Chancellor, the exercise of which carried with it a very wide discretion. Hence, in the Court of Chancery general orders for costs were made that included “full costs”, “good costs”, “double costs” and others.
[5] (1878) 3 AC 944.
[6] (1992) 174 CLR 178.
[7] (1742) 26 ER 642.
[8] (1743) 2 Atk 551.
[9] (1888) 39 Ch D 133.
All aspects of costs have always been within the purview of the trial judge. That includes the imposition of costs, the basis of their imposition and whether some, all or none of them should be ordered. Judges possess a high degree of latitude in the making of costs orders. Costs can be ordered on one basis for all of the case save for the time and effort spent on one particular issue. The decision in Commissioner of Australian Federal Police v Razzi (No 2)[10] seems to be little more than one illustration of that matter. In the Federal Court of Australia and in the Federal Circuit Court of Australia I am familiar with a method of ordering costs by which the judge makes an order for a precise lump sum of costs to be paid thereby avoiding the time-consuming and expensive process of taxing costs.
[10] (1991) 101 ALR 425.
Underpinning any exercise of discretion about the making of any order for costs is the need for that discretion to be exercised judicially. The authorities on point are both English and Australian. I canvassed them in Yeo & Rambaldi v Arifovic[11] in the following terms –
While possessing a discretion in relation to the award of costs, that discretion is not one to be exercised arbitrarily as the discretion must be exercised judicially in accordance with established principles and in relation to the facts of a case. One scarcely needs authority for that proposition, but authority on point dates back to the last century in the decision of Buckley LJ in Scherer v Counting Instruments Ltd.[12] More recently the proposition was stated by the Full Court of the Federal Court of Australia in Cummings v Lewis & Ors,[13] by Toohey J in Hughes v Western Australian Cricket Association Inc,[14] by Cooper J in Brott v Grey,[15] by Branson J in Re Principal Strategic Options Pty Ltd;Coshott v Coshott[16] and by Tamberlin J in Nine Filmsand Television Pty Ltd v Ninox Television Ltd[17].
…
A costs order does not serve to punish the party against whom the costs order is made. That much was held by the High Court in Latoudis v Casey.[18] There, McHugh J explained that the rationale for a costs order is that it is just and reasonable that the party who has caused the other to incur costs of litigation should reimburse the successful party for the liability incurred.
[11] [2017] FCCA 1189.
[12] [1986] 1 WLR 615, 621.
[13] (1993) 41 FCR 559.
[14] (1986) ATPR 40-748.
[15] [2000] FCA 1836.
[16] [2001] FCA 664.
[17] [2006] FCA 1046.
[18] (1990) 170 CLR 534.
Since the enactment of the Family Law Act, a statutory regime has replaced equitable and common law concepts relating to costs in family law litigation. No narrow construction is to be applied to the provisions of s 117(1), 117(2) and 117(2A) of the Family Law Act, as was held in Re JJT; ex parte Victoria Legal Aid.[19] In that case Kirby J was of the view that whatever may have been the source of the court’s power to order costs, on and from the commencement of the Family Law Act the sole repository of the power to make a costs order has been the statute.
[19] (1998) 195 CLR 184, 201.
As with any power conferred by statute, the starting point in any consideration of the exercise of that power is the source of the power under the relevant statutory provision. So much was the subject of judicial pronouncement by the High Court in Penfold v Penfold[20] in reference to s 117 of the Family Law Act, albeit in terms different to its current iteration. The essential characteristic of s 117(2) has been preserved in the current iteration of s 117(2) in that the court may make such order as to costs it considers just if the court is of opinion in a particular case that there are circumstances that justify it doing so. The High Court held that the provisions of s 117(1) to the effect that each party to a proceeding under the Family Law Act shall bear his or her own costs must yield to s 117(2) whenever a judge finds that there are circumstances which justify the making of an order for costs.
[20] (1980) 144 CLR 311.
The decision of the High Court in Penfold v Penfold[21] was an early authoritative statement about the proper interpretation of s 117(2) of the Family Law Act. There, the plurality (Stephen, Mason, Aickin and Wilson JJ) held that it was erroneous for the Full Court of this court (Evatt CJ, Asche & Lusink JJ) to have concluded that an order can only be made under s 117(2) in a clear case. The High Court held that s 117(2) of the Family Law Act said no such thing and that the applicant for costs has to establish no more than the existence of circumstances justifying the making of the order and further, the applicant for costs bears no onus to show that it is a clear case for an order for costs. However, s 117(2A) of the Family Law Act overcame other observations in that decision, especially the observation that “in the absence of some positive legislative indication, we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs”.
[21] (1980) 144 CLR 311.
By 1981 the Family Court recognised the existence of a wide discretion in relation to orders for costs. So much was held in In the Marriage of Tuck.[22] The following year similar observations were made in Greedy & Greedy.[23] In In the Marriage of Oriolo & Oriolo[24] the Full Court (Emery, Fogarty & Murray JJ) pronounced on point to similar affect.
[22] (1979) 7 Fam LR 492.
[23] (1982) 8 Fam LR 669.
[24] (1985) 10 Fam LR 665.
Ordinarily each party bears his or her (occasionally its) own costs in family law litigation pursuant to s 117(1) of the Family Law Act. That is for the simple reason that s 117(1) of the Family Law Act makes provision for an order to that effect. Section 117(2) of the Family Law Act enables an order to be made pursuant to which one party is ordered to pay costs. Where circumstances justify the court so doing, the court is empowered to make such order as to costs as it considers just, as s 117(2) provides. The applicable rules of court mentioned in s 117(2) include r 19.18(1) of the Family Law Rules. Relevantly, that rule provides that the court possesses a discretion to make an order that costs be paid in a specific sum or on a particular basis, most usually on an indemnity basis of the type canvassed in Colgate Palmolive Co v Cussens Pty Ltd.[25]
[25] (1993) 46 FCR 225.
Illustrations of costs orders under s 117(2) include indemnity costs orders or an order for costs to be paid on a particular basis or at a particular rate. Those orders are permissible yet in arriving at an order other than one to which s 117(1) applies, the court must undertake an examination and consideration of the elements in s 117(2A) of the Family Law Act.
Section 117(2A) is expressed in mandatory terms to require a court when considering what order (if any) should be made under s 117(2) to have regard to seven matters. None of those seven matters is determinative. However, the court must consider each matter in the seven alphabetical subsections of s 117(2A).
As was held in PBF & TRF,[26] it is not necessary for more than one factor to exist under s 117(2A) before it is competent for a judge to enliven s 117(2A) so as to make a costs order that departs from the general principle set out in s 117(1) of each party bearing his or her own costs.
[26] (2005) 33 Fam LR 123.
The elements of s 117(2A) and the observations in In the Marriage of Wilson[27] (especially those of Kay J) lead me to the conclusion that direct evidence of those matters relevant to costs is essential. In other words, in order for me to determine a question of costs – whether as to liability for or quantum of costs – direct evidence (rather than mere submission) must be before me about each matter canvassed in the alphabetical subsections of s 117(2A). Accordingly, I needed direct evidence of –
a)the financial circumstances of each party;
b)whether either was in receipt of legal aid;
c)the conduct of the parties in respect of the issues set out in s 117(2A)(c);
d)whether the litigation was necessitated by a failure to comply with a previous order;
e)whether any party had been wholly successful in the proceeding;
f)whether an offer of settlement had been made to settle the litigation and its terms; and
g)any other relevant matter.
[27] (1989) 13 Fam LR 205.
As with any costs order, the need for such an order to be just was stated in In the Marriage of Hogan.[28] That is the case irrespective of whether the costs order is interim or final.
[28] (1986) 10 Fam LR 681.
In recent decisions I undertook an extensive examination of the law relating to indemnity costs including Goodridge & Beadle (No 2)[29], Harlen & Hellyar (No 2)[30] and Hearl & Digby.[31] In them I traced the history of equity’s early treatment of costs from Jones v Coxeter,[32] Corporation of Burford v Lenthall[33] and Andrews v Barnes[34] to the modern statements of principle in cases such as Re JJT; ex parte Victoria Legal Aid[35] and prior to that decision, Penfold v Penfold[36] and Knight v F.P. Special Assets Ltd.[37] Other statements of principle from the High Court have emerged on costs, although not necessarily in relation to indemnity costs. In Northern Territory v Sangare[38] the High Court addressed the issue of depriving a successful party of costs by reason of the impecuniosity of the unsuccessful party. In Helljay v Investments Pty Ltd v Deputy Commissioner of Taxation[39] Hayne J reviewed the Australian authorities on awarding indemnity costs to include Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd,[40] Colgate-Palmolive Co v Cussons Pty Ltd,[41] Re Wilcox; ex parte Venture Industries Pty Ltd,[42] Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd,[43] Rosniak v Government Insurance Office,[44] Pirrotta v Citibank Ltd,[45] Re National Safety Council of Australia, Victorian Division (in liq) (No 2),[46] Norton v Morphett[47] and EMI Records Ltd v Ian Cameron Wallace Ltd.[48]
[29] [2019] FamCA 786.
[30] [2020] FamCA 413.
[31] [2020] FamCA 474.
[32] [1742] 26 ER 642.
[33] [1743] 26 ER 731.
[34] (1888) 39 Ch D 133.
[35] (1998) 195 CLR 184.
[36] (1980) 144 CLR 311.
[37] (1992) 174 CLR 178.
[38] (2019) 265 CLR 164.
[39] (1999) 74 ALJR 68.
[40] (1988) 81 ALR 397.
[41] (1993) 46 FCR 225.
[42] (1996) 72 FCR 151.
[43] (1995) 36 NSWLR 242.
[44] (1997) 41 NSWLR 608.
[45] (1998) 72 SASR 259.
[46] [1992] 1 VR 485.
[47] (1995) 83 A Crim R 90.
[48] [1983] Ch 59.
The decision of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd[49] has spawned an extremely large volume of decisions in this country in courts of all states and territories as well as in courts in the federal arena.
[49] (1993) 46 FCR 225.
Other more recent statements of principle at High Court level have been made on the question of indemnity costs including those of Gummow J in McKewins Hairdressing & Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation.[50] In Ruhani v Director of Police[51] Kirby J distilled a collection of principles to reveal the circumstances in which an indemnity costs order may be justified. Those included –
a)where the opponent’s conduct was “plainly unreasonable” and “pursued for an ulterior motive”, citing PCRZ Investments Pty Ltd v National Golf Holdings Ltd;[52]
b)where an opponent’s conduct was “undertaken in an unmeritorious, deliberate or highhanded” way, citing NSW Medical Defence Union Ltd v Crawford & Bailey;[53] and
c)where the opponent has been shown to be guilty of “unreasonable conduct, albeit that it need not rise as high as vexation”, citing Rosniak.[54]
[50] (2000) 74 ALJR 1000.
[51] (2005) 222 CLR 489.
[52] [2002] VSCA 24.
[53] (1993) 31 NSWLR 469.
[54] Op cit.
While not relevant to this case, the High Court in Stewart v Atco Controls Pty Ltd (in liq) (No 2)[55] held that indemnity costs are enlivened where one party has achieved a more favourable outcome than was recorded in that party’s Calderbank offer.
[55] (2014) 252 CLR 331.
A school of thought exists that an order for indemnity costs is exceptional (In the Marriage of Kohan,[56] Yunghanns v Yunghanns[57] and Prantage & Prantage[58]). Personally, I do not consider it is. In Goodridge & Beadle (No 2)[59] I extensively examined the relevant authorities.
[56] (1992) 16 Fam LR 245.
[57] (2000) 26 Fam LR 331.
[58] (2013) 49 Fam LR 197.
[59] [2019] FamCA 786.
In the family law jurisdiction, the phenomenon of costs being ordered on an indemnity basis is not new. The jurisprudential basis for the making of an indemnity costs order was examined by the Full Court in In the Marriage of Kohan.
Of course, the law concerning indemnity costs orders is of very considerable antiquity. Indemnity costs were altogether different to costs orders made by common law courts where almost without deviation, costs were awarded on a party/party basis whereas the courts of chancery took the view that costs could be awarded on a variety of bases and on an equally varied measure of estimation. The authorities demonstrating those propositions included Jones v Coxeter, Corporation of Burford v Lenthall,[60] Mordue v Palmer,[61] Howes v Barber,[62] Garnet v Bradley[63] and Andrews v Barnes. Indemnity costs were routinely ordered where a party made an allegation of fraud but failed to prove it, as was illustrated in Forester v Read[64] and Christie v Christie.[65]
[60] [1743] 26 ER 731.
[61] (1870) LR 6 Ch App 22.
[62] (1852) 18 QB 588.
[63] [1878] 3 AC 944.
[64] (1870) LR 6 Ch App 40.
[65] (1873) LR 8 Ch App 499.
In more recent times in Australia, and in state and federal jurisdictions beyond the family law jurisdiction, indemnity costs orders have attracted an array of extremely learned and deeply considered judgments of judges possessed of very great erudition and intellect. Those include the decision of Holland J in Degman Pty Ltd (in liq) v Wright (No 2),[66] the decision of Tadgell J in Australian Guarantee Corporation Ltd v De Jager,[67] and the decision of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd.[68]
[66] [1983] 2 NSWLR 354.
[67] [1984] VR 483.
[68] (1988) 81 ALR 397.
In In the Marriage of Kohan, the Full Court (Strauss, Lindermayer and Bulley JJ) held that a court in this jurisdiction should not depart from the ordinary rules in relation to costs “unless there are circumstances of an exceptional kind justifying such a departure”. That statement has been applied in such cases as Yunghanns, Addison & Leahy,[69] Medlon & Medlon (No 6)[70] and recently in Mansfield & Mansfield,[71] judgment in which was handed down on 25 October 2019. There, citing In the Marriage ofRobinson and Higginbotham[72] and Stephens v Stephens (Enforcement) (Costs)[73] the Full Court said it is well settled that the Full Court should be reluctant to interfere with the decisions of a trial judge relating to costs. When sitting as a member of the Federal Circuit Court of Australia prior to my elevation to this court I canvassed questions about indemnity costs in such cases as Yeo & Rambaldi (as trustees of the bankrupt estate of Arifovic) v Arifovic& Anor (No.2),[74] Gordon & Gordon[75] and Gordon & Gordon(No 2).[76] I adhere now to my observations in those decisions.
[69] [2008] FamCA 248.
[70] (2015) 54 Fam LR 1.
[71] [2019] FamCAFC 186.
[72](1991) 14 Fam LR 559.
[73] (2010) 44 Fam LR 117.
[74] [2017] FCCA 1189.
[75] [2017] FCCA 2899.
[76] [2018] FCCA 1617.
However, several things must be said of Kohan. First, judgment in it was handed down in 1992, almost 30 years ago. Since then, a huge amount of learning at High Court level has evolved on the subject of indemnity costs rendering of highly dubious utility the statement in that case that a court should not depart from ordinary costs rules unless there are circumstances of an exceptional kind justifying such a departure. The cases surveyed in these reasons, especially at High Court level demonstrate that no such statement is presently maintainable.
The second reason why in my view In the Marriage of Kohan is unsupportable when examined against the law on indemnity costs in the year 2020 relates to the way the decision of Sheppard J in Colgate-Palmolive has been embraced, seemingly universally, throughout state and federal courts in Australia since 1993. The distillation of principle to be extracted from the decision of Sheppard J may be stated in the following terms, as I did when sitting as a member of the Federal Circuit Court of Australia in Horne (in his capacity as trustee of the bankrupt estate of Narain) v Narain[77] –
[77] [2017] FCCA 1190.
16.The genesis of modern learning, at least in the Federal jurisdiction, in respect of indemnity costs is attributable to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[78] (“Colgate-Palmolive”). That was an intellectual property case. Sheppard J addressed an award of costs on an indemnity basis. Relevantly, his Honour said that costs on an indemnity basis could be awarded –
a)where a party made allegations of fraud knowing them to be false or where that party made irrelevant allegations of fraud;
b)where evidence of misconduct existed causing loss of time to the court and the other parties;
c)whether the proceeding was commenced for some ulterior motive;
d)whether the proceeding was commenced or continued with wilful disregard of known facts or clearly established law;
e)where allegations were made that ought never to have been made;
f)where the proceeding was unduly prolonged by groundless contentions; and
g)where there was an imprudent refusal of an offer of compromise.
[78] (1993) 46 FCR 225.
Where an application should never have been brought in the first place, Medlon & Medlon (No. 6) stands for the proposition that an order for indemnity costs might properly be made.
Application of the law to this case
Both the applicant, first respondent and Mr V Armington filed written submissions. It is necessary to record the more important matters that arose from those submissions. On behalf of the wife, Ms Mariole contended as follows –
(a)the financial circumstances of the Husband and Wife demonstrate an immense income earning disparity between them. This inequality informed Judge Kirton’s reasons in making the litigation funds orders. At present, the Husband’s annual income is $295,693 whilst the Wife’s financial circumstances are modest in that she is only in receipt of child support as assessed of $22,152 per year. Further it is submitted on behalf of the Wife that at all relevant times, the Husband has controlled the parties’ wealth;
(b)as set out in paragraph 10 of the First Submissions, the Wife submits that the Husband’s conduct in bringing two applications in July and August 2020 seeking to discharge the litigation funding orders amounts to an abuse of process. Further that in the course of his second application the Husband made an unfounded and unmeritorious claim that he was denied procedural fairness by Justice Johns. This was in circumstances where he filed an Application in a Case on 2 July 2020 and an Affidavit in support thereof but elected not to file an updated Financial Statement prior to his application being determined by her Honour on 16 July 2020 despite on his own admission, his reduced salary coming into effect from 1 April 2020.
(c)assuming that the Husband is unsuccessful in his second application, he will have been wholly unsuccessful in both of his applications to discharge the litigation funding orders; and
(d)an additional matter of relevance is that prior to the hearing on 19 August 2020, the Husband was on notice of the Wife’s intention to seek an order for indemnity costs against him in the event that he proceeded with his Application in a Case filed 7 August 2020.
Additionally, the wife made further points. They were as follows –
As set out in the First Submissions, it is submitted on her behalf that the Husband’s re-litigation of his application to discharge the litigation funding orders constitutes an abuse of process and comes within the second ground proffered by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd, namely “evidence of misconduct existed causing loss of time to the court and the other parties.” Such conduct offends the principle of finality promoted by the High Court in Burrell v R.[79] As a result, the Wife was to put to expense and the Court’s limited resources were misused as two different judicial officers were required to hear and determine the Husband’s applications.
Such conduct was what French J (as he then was) described in Re Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd,[80] which Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd relied upon with respect to this second ground, namely “interlocutory processes were unduly protracted” which the Husband in this case “must bear much of the responsibility for” given he caused “wasted appearances” by the Wife.
The costs order sought by the Wife are not sought to punish the Husband, however consistent with the rationale explained by McHugh J in Latoudis v Casey,[81] they serve to address the liability she has incurred in the lead up to the sixth occasion these proceedings have been listed for trial since commencing in February 2016. Furthermore, it is consistent with the High Court decision in Northern Territory v Sangare[82] any alleged impecuniosity by the Husband should not deprive her of a costs order in her favour. In any event, it is submitted on behalf of the Wife that the Husband is not impecunious in circumstances where on his evidence his yearly income is $295,693.
[79] (2008) 238 CLR 218.
[80] [1991] FCA 187 at [22].
[81] (1990) 170 CLR 534.
[82] (2019) 265 CLR 164.
Mr Armington resisted the making of any costs order against him especially an indemnity costs order. Relevantly paraphrased, his contentions were as follows –
a)the wife has been the sole reason (his words) for six hearings being postponed;
b)since 2013 the wife has driven this litigation by “repetitious, incessant and relentless demands for more and more information” (his words);
c)“every imaginable opportunity seems to have been taken by her lawyers to follow purposeless avenues” for hidden wealth;
d)he has been forced to incur substantial legal costs;
e)the wife’s partner provides the wife and children with permanent accommodation in Suburb S;
f)the wife’s brother is a co-founder of a government bond fund;
g)the wife’s claims are vexatious and without evidence made against a litigant in person;
h)the whole litigation is “hypocrisy in the extreme and grubbily opportunistic” (his words); and
i)he argues that the sum sought by the wife is unreasonable.
In In the Marriage of Wilson[83] it was held that costs’ debates must proceed on evidence rather than surmise, conjecture or speculation. No evidence in this case has yet emerged about the wife’s brother being wealthy as the husband says.
[83](1980) 6 Fam LR 566.
In my view it is appropriate to make an order under s 117(2) of the Family Law Act deviating from the usual prescription under s 117(1) for each party to bear his, her or its own costs. In order to reach that result I am required to consider each element of s 117(2A) of the Family Law Act. As was pointed out in PBF v TRF[84] and also in Bacall & Zagar (No. 2),[85] it is not necessary for more than one element mentioned in s 117(2A) to exist so as to enliven s 117(2).
[84](2005) 33 Fam LR 123.
[85][2020] FamCA 598.
The husband’s application to set aside the orders made by Judge Kirton for a dollar-for-dollar payment by way of litigation funding failed before John’s J and it failed before me. I find it impossible to accept that husband is in straitened financial circumstances. He is undoubtedly less prosperous than he was previously. But that is of historical relevance only. He was using an ill-grounded platform when applying to set aside the dollar-for-dollar orders before Johns J and before me. As mentioned earlier, in my view his application was opportunistic. It has little to commend it, as I found.
In my view his application was wholly unsuccessful. That enlivened s 117(2).
As for the basis of the assessment of costs, there is considerable merit in this application for indemnity costs along conventional orthodoxy, as canvassed by Shepard in Colgate-Palmolive Co v Cussons Pty Ltd.
The application that failed before Johns J and then me ought never to have been made.
The husband must pay the wife’s costs of and incidental to the application before me to discharge the orders made by Judge Kirton on an indemnity basis in the sum of $7,412.60. He must make that payment within 60 days.
Mr V Armington filed submissions on costs. However did not seek any.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 16 September 2020.
Associate:
Date: 16 September 2020
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