Ayers & Ayers (No 2)
[2023] FedCFamC1F 405
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
FIRST INSTANCE
Ayers & Ayers (No 2) [2023] FedCFamC1F 405
File number(s): BRC 7331 of 2021 Judgment of: CAREW J Date of judgment: 24 May 2023 Catchwords: FAMILY LAW – COSTS – Application brought against the husband by the wife – Where the wife seeks to recover costs incurred in the property proceedings on an indemnity basis – Where the circumstances do not warrant an indemnity costs order – Where it is appropriate for the wife to receive her costs on a party and party basis in the fixed sum of $49,377.40 Legislation: Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Fitzgerald vFish sub nom PBF v TRF (FLR) (2005) 191 FLR 294
Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus [2007] NSWSC 23
Ayers & Ayers [2023] FedCFamC1F 33
Kohan and Kohan (1993) FLC 92-340
Lenova & Lenova (Costs) [2011] FamCAFC 141
Nada & Nettle (Costs) (2014) FLC 93-612
Parke & the Estate of the Late A Parke (2016) FLC 93–748
Penfold v Penfold (1980) 144 CLR 311
Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Number of paragraphs: 33 Date of last submission/s: 3 May 2023 Date of hearing: Heard in chambers pursuant to Order of 14 March 2023 Place: Brisbane ORDER
BRC 7331 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS AYERS
Applicant
AND: MR AYERS
Respondent
order made by:
CAREW J
DATE OF ORDER:
24 MAY 2023
THE COURT ORDERS THAT:
1.The husband is to pay the wife’s costs of and incidental to the proceedings fixed in the sum of $49,377.40 within 60 days of the date of this Order.
NOTATION:
A.There is no Court by the name “Federal Circuit and Family Court of Australia”. This Court was formerly known as the Family Court of Australia and is now known as the Federal Circuit and Family Court of Australia (Division 1).
B.The design of the seal affixed to this Order issued by the Federal Circuit and Family Court of Australia (Division 1) was determined by the Attorney-General pursuant to the undated Federal Circuit and Family Court of Australia (Seal) Determination 2021 signed by the Attorney-General.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Carew J:
After a three day trial ending on 30 November 2022, I made a final property order on 3 February 2023 disposing of the proceedings between Mr Ayers (whom I will refer to as “the husband” to assist with the anonymisation of these reasons) and Ms Ayers (whom I will refer to as “the wife”). By an application in a proceeding filed 3 March 2023, the wife now seeks that her costs of those proceedings be paid by the husband in either a fixed sum of $107,699.80 (close to indemnity basis) or in the alternative a fixed sum of $78,538.60 (mid-point between indemnity and party and party basis) or in the further alternative a fixed sum of $49,377.40 (party and party basis).
The wife also seeks that the husband pay her costs of and incidental to this application in a proceeding.
On 14 March 2023, I made an order requiring submissions to be filed by each party (the wife filed her written submissions on 19 April 2023, the husband filed his written submissions on 3 May 2023 and the wife did not file written submissions in reply by 10 May 2023 as permitted). Neither party opposes the issue of costs being determined in chambers.
BACKGROUND
The relevant background to this matter is set out in my reasons for judgment dated 3 February 2023 (“the judgment”) at [1]–[17].[1] In summary, after a long marriage, the parties, while agreeing to equality of distribution of their assets, could not agree whether two real properties were property of the husband for the purposes of the proceedings. I found that they were and divided the property equally.
[1] Ayers & Ayers [2023] FedCFamC1F 33.
HOW COSTS APPLICATIONS ARE DETERMINED
In this Court, each party generally bears their own costs (s 117(1) of the Family Law Act 1975 (Cth) (“the Act”)). However, where there are circumstances that justify an order for costs, the Court is able to make such order as is considered just having regard to the matters contained in relevant subsections of s 117 and applicable Rules of Court (s 117(2)).
The list of matters to which the Court must have regard when determining a costs application are set out in s 117(2A) of the Act and since the commencement of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) on 1 September 2021, there are additional matters to which the Court must have regard.[2]
[2] The notation to s 117(2) of the Act refers to s 69(4)(d) and (e) of the FCFCOA Act.
The matters set out in s 117(2A) of the Act are as follows:
(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.
When considering the factors set out in s 117(2A) of the Act, it is sufficient for one factor to be present.[3]
[3] Fitzgerald vFish sub nom PBF v TRF (FLR) (2005) 191 FLR 294 at 301, [41].
Impecuniosity, of itself, is not a bar to making a costs order.[4]
[4] Nada & Nettle (Costs) (2014) FLC 93–612 at 79,589, [11]; see also Lenova & Lenova (Costs) [2011] FamCAFC 141 at 3, [12].
An additional source of power to award costs in an appropriate matter is to be found in s 69(4)(d) and (e) of the FCFCOA Act, which empowers the Court to award costs against a party and the costs awarded are to be assessed on an indemnity basis or otherwise.
There is an additional mandatory requirement created by s 68(4) of the FCFCOA Act which requires the Court to take into account any failure to comply with the duty imposed by ss 68(1) or (2), which require the parties and the lawyers for the parties to conduct the proceedings in a way that is consistent with the overarching purpose of the family law practice and procedures provisions of the FCFCOA Act. The overarching purpose is set out in s 67 and requires, among other things, the proceedings to be conducted as “quickly, inexpensively and efficiently as possible”.
At the time the substantive proceedings commenced, the Rules applicable to costs applications were contained in the Family Law Rules 2004 (Cth), but those Rules were repealed on 1 September 2021 by the Family Law Repeal Rules 2021 (Cth), and replaced with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”), with effect from 1 September 2021. Note 1 to r 1.02(2) of the Rules states as follows:
… The new Rules apply to a proceeding that was commenced in accordance with the old Rules and was not determined before the repeal of the Rules.
Part 12.5 of the Rules deals with ‘orders for costs’ and, among other things, empowers the Court to set a time for payment.[5]
[5] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”), r 12.13(5).
Part 12.6 deals with ‘calculation of costs’ and provides as follows:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
(2)If costs are payable under the Family Law Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party and party basis.
(3) In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable proceedings;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures;
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
Rule 12.08(2) (referred to in r 12.17(3)(b)) provides as follows:
(2)In considering whether a party’s legal costs have been fairly, reasonably and proportionately incurred, regard must be had to all relevant matters including, but not limited to, whether a lawyer representing the party, a lawyer representing any other party, or any self‑represented litigant has:
(a)complied with all relevant rules and orders of the court, including requirements that documents be filed or provided to other parties by a given date; and
(b)acted reasonably in raising, pursuing or contesting a particular allegation or issue; and
(c)made reasonable efforts, subject to the client’s instructions, to resolve the dispute through negotiation, mediation or arbitration; and
(d) made reasonable efforts to narrow the issues in dispute; and
(e)filed no more interlocutory applications than are reasonably necessary in the circumstances of the proceeding; and
(f)filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding.
An applicant for costs bears no “additional or special onus” other than the establishment of “justifying circumstances”.[6]
[6] (1980) 144 CLR 311 at 315.
As to the identification of such circumstances by the Court, the High Court of Australia in Penfold v Penfold[7] said the following:
Sub-section (2) [of s 117] does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised. Accordingly, 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.
[Citation omitted]
[7] Ibid at 315–316.
The Court will not lightly make an order for costs to be paid on an indemnity basis. There needs to be some circumstance of an exceptional kind to justify that course.[8]
[8] Kohan and Kohan (1993) FLC 92-340 at 79,614; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (“Colgate-Palmolive”) at 233.
The tensions created by the differing objectives sought to be addressed by a costs order awarded on a party and party basis as opposed to an indemnity basis were discussed in Re Wilcox, Ex parte Venture Industries Pty Ltd[9] where the Full Court of the Federal Court said at 156:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.
[9] (1996) 72 FCR 151 at 156 (‘Re Wilcox’).
The Full Court went on to restate the principles from Colgate-Palmolive Co v Cussons Pty Ltd (“Colgate-Palmolive”)[10] in the following terms:
(a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis. [11]
[10] Colgate-Palmolive (fn 8).
[11] Re Wilcox (fn 9) at 156–157.
While there is no exhaustive list of what circumstances may warrant an order for costs to be paid on an indemnity basis, some particular circumstances that have been found to justify such an order were identified by Sheppard J in Colgate-Palmolive[12] as follows:
(a)Making allegations of fraud knowing them to be false;
(b)Making irrelevant allegations of fraud;
(c)Evidence of particular misconduct that causes loss of time to the Court and to the other parties;
(d)Commencing or continuing proceedings for some ulterior motive or in wilful disregard of known facts or clearly established law;
(e)Making allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and
(f)An imprudent refusal of an offer to compromise.[13]
[12] Colgate-Palmolive (fn 8).
[13] Colgate-Palmolive (fn 8) at 233.
Not only does this Court have the power to order a specific amount for costs,[14] it has been the policy (at least of the former Appeal Division of this Court) for a specific amount to be ordered rather than requiring an assessment of costs.[15] This is because the latter approach will inevitably involve the parties in yet further conflict, delay, and cost.[16]
[14] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 12.17(1)(a).
[15] Stopford Malloy & Malloy (Costs) [2018] FamCAFC 6 at [10]–[12] (“Stopford”).
[16] Ibid.
In Parke & the Estate of the Late A Parke,[17] Murphy J quoted with approval the observations made by Einstein J in Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus[18] when that court was considering an analogous provision to that contained in r 12.17(1)(a) of the Rules:
130.If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court” (Beach Petroleum NL v Johnson (No 2) [1995] FCA 1250; (1995) 57 FCR 119, at [24]cited in Idaport at [9]). The process does not “by its very nature ... envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”. (Idaport at [9](v), citing Harrison v Schipp[2002] NSWCA 213; (2002) 54 NSWLR 738).
131.Obviously enough, the court must act judicially in fixing or specifying a sum of costs, but:
...the requirement that the power to award a gross sum should be exercised judicially does not mean that it must be exercised in any scientific or formulaic manner. At the heart of the judicial function is the responsibility to weigh up competing factors and considerations, many of which might conflict, to reach a determination. Acting judicially carries with it an obligation to apply the rules of natural justice, to act impartially and to apply the law to the facts. ...
[17] (2016) FLC 93–748 at 81, 943–81,944, [122]–[134].
[18] [2007] NSWSC 23 at [9].
WIFE’S SUBMISSIONS
In summary, the wife relies on the following matters in support of her application for costs:
(a)There is no impediment on the husband’s ability to pay costs given his employment as an executive of J Pty Ltd and annual salary package of $478,296;
(b)The wife is unemployed;
(c)The husband’s unreasonable defence of the wife’s application seeking declarations for a resulting and constructive trust in relation to Property H and Suburb D properties respectively;
(d)The husband was wholly unsuccessful in the substantive proceedings; and
(e)The husband’s conduct surrounding offers of settlement prior to final hearing further evidence his “mala fides” and intention to “aggravate and perpetuate litigation” and are as follows:
(i)On 28 January 2022, the wife caused her solicitors to forward an offer of compromise. The offer made by the wife was that she retain $1,350,000 of the non-superannuation assets. The outcome obtained by the wife pursuant to the final order was that she retain $1,514,912 resulting in the wife obtaining a judgment in the sum of $164,912 greater than her offer of compromise. The husband rejected the offer on 2 February 2022 without a counteroffer;
(ii)The husband had made an offer on 9 December 2021, proposing to pay the wife the sum of $950,000 from the proceeds of sale of the CC Town property; and
(iii)On 20 May 2022, the husband reduced his offer by $172,235, with the wife to retain $777,765 from the proceeds of sale of the CC Town property and that she, otherwise, retain all other assets in her name and possession and receive an equalisation of superannuation.
HUSBAND’S SUBMISSIONS
In summary, the husband relies on the following matters to resist the wife’s application for costs:
(a)While the wife is not employed, she has the ability to earn income from properly investing capital, noting she received cash of $1,472,912 and superannuation of $441,084.50 that could be invested to produce income;
(b)The husband earns $3,814 per week however his weekly expenses total $5,604. Thus, the husband has a weekly shortfall of $1,790;
(c)The husband has a net value of equitable interests in the amount of $1,035,952, from his interest in the Suburb D property and Property H unit, but in relation to the Property H unit the husband is, “unlikely to have access to that interest until his parents sell the property or until after their deaths” (per [133] of the judgment);
(d)The final orders financially impact the husband more than the wife in real money terms;
(e)The husband deposes to being significantly impacted as a result of the final orders and the legal fees paid to his solicitors, in the amount of $306,704 (as compared to the wife’s legal fees amounting to $160,360);
(f)As at 5 April 2023, the husband’s financial circumstances are summarised as follows:
(i)Total personal bank balance - $160,768;
(ii)Credit card debt - $40,375;
(iii)Loan owing to his brother, Mr C - $100,000
(iv)Net position - $20,393.
(g)The husband lacks financial capacity to pay a costs order and submits that a costs order “would have a catastrophic impact on [the husband’s] financial position, particularly if [the husband] were ordered to pay a costs order to [the wife] in the sums she is seeking, being between $49,337 and $107,699.80”;
(h)“[I]t can be inferred that given [the husband’s] net position, he may need to borrow funds to pay a costs order”;
(i)Whilst the husband was ultimately unsuccessful in his application concerning the Suburb D and Property H properties, the husband submits his case was still arguable and the manner in which he ran his case should not be considered “conduct” for the purposes of s 117(2A)(c) of the Act; and
(j)The wife’s offer dated 28 January 2022 did not set out the consequences of a failure to accept the offer i.e. that the wife would apply for costs (other than noting it was ‘save as to costs’).
DISCUSSION
I note from [120] of the judgment that:
… The husband’s current annual salary is $432,588 and superannuation is contributed on his behalf of an additional $45,708 (annually). In addition, the husband is eligible for significant bonuses dependent upon a number of factors. In particular, the husband is eligible for a short term incentive payment of approximately $216,000 and long term incentive options which, if granted, have a present day value of about $72,000. The husband was confident in his oral evidence about receiving (at least) a considerable portion of his short term incentive.
I do not regard the husband’s denial of an equitable interest in Property H or a greater equitable interest in the Suburb D property than one percent as representing ‘conduct’ justifying a costs order.
The husband was not wholly unsuccessful in the proceedings in that the debt owing to his brother was deducted from the asset pool contrary to the wife’s position at trial.
The offer made by the wife on 28 January 2022 was that she retain $1,100,000 from the sale proceeds of the CC Town property (and the husband $313,707), that there be an equalisation of the superannuation benefits, and that each party retain all other assets in their respective names or possession.
The final order provided that the wife receive $1,265,465 from the proceeds of sale of the CC Town property, in addition to the assets in her name and possession, as well as an equalisation of superannuation i.e. the wife achieved a better result than her offer.
Parties to litigation in this Court are encouraged to make offers of settlement. If offers are to mean anything, there must be a real prospect of them having a cost consequence if refused. The wife achieved a better result at trial and in my view that is a circumstance justifying a costs order in her favour.
The circumstances do not warrant an indemnity costs order. It is appropriate for the wife to receive her costs on a party and party basis. There is no issue taken as to the calculation of costs on this basis and accordingly the husband will be ordered to pay the wife’s costs fixed in the sum of $49,377.40. The husband will have 60 days to pay.
I do not propose to make any further order for costs relating to the application in a proceeding itself.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 24 May 2023
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