Baker & Darzi
[2013] FCWA 84
•22 AUGUST 2013
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
CHILD SUPPORT (ASSESSMENT) ACT 1989
LOCATION: PERTH
CITATION: BAKER and DARZI [2013] FCWA 84
CORAM: WALTERS J
HEARD: WRITTEN SUBMISSIONS
DELIVERED : 22 AUGUST 2013
FILE NO/S: PTW 5453 of 2008
BETWEEN: KELLY BAKER
Applicant
AND
SALVADOR DARZI
RespondentAND
ADRIANA DARZI
Third Party
Catchwords:
FAMILY LAW – Costs – proceedings for property settlement – application by the wife for costs on an indemnity basis – where the conduct of the husband as a litigant was appalling – where the husband was wholly unsuccessful in the proceedings – where the husband's conduct of the proceedings was motivated by his anger and resentment towards the wife, and not by any desire or willingness to assist the court to understand and fairly determine relevant issues in the property settlement proceedings – where the husband litigated for ulterior motives – where the husband continued the proceedings in wilful disregard of the known facts – where the husband made allegations which ought never to have been made – where the husband prolonged the proceedings by raising groundless contentions – consideration of dicta from the decisions of the Full Court in Hand & Bodilly (2013) FamCAFC 98 and Prantage & Prantage (2013) FLC 93-545 – consideration of whether the Court has power to order costs on a solicitor and client (or lawyer and client) basis – consideration of whether the only bases upon which costs can now be ordered are costs on a party/party basis and costs on an indemnity basis – order made for costs to be assessed on an indemnity basis
Legislation:
Family Law Act 1975 (Cth), s 117, s 117(1), s 117(2), s 117(2A)
Family Law Rules 2004 (Cth), ch 19, r 19.01(2), r 19.08(3), r 19.18, r 19.18(1), r 19.18(2), r 19.34, r 19.34(1), r 19.34(2), Sch 3
District Court Rules (2005)(NSW)
Category: Not Reportable
Representation:
Counsel:
Applicant: Self Represented Litigant
Respondent: Self Represented Litigant
Third Party : Self Represented Litigant
Solicitors:
Applicant: Self Represented Litigant
Respondent: Self Represented Litigant
Third Party : Self Represented Litigant
Case(s) referred to in judgment(s):
Bouras v Grandelis (2005) 65 NSWLR 214
Cachia v Hanes (1994) 179 CLR 404
Casley & Casley (2010) FLC 93-449
Colgate‑Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225
Cross v Beaumont (2008) 39 Fam LR 386
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania))
............. v Fish and Another (2005) 191 FLR 294 at 130
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1998]
............. 81 ALR 397
Hand and Bodilly (2013) FamCAFC 98
Hawkins & Roe (2012) 47 FamLR 526
Hitch & Hitch (2012) 47 FamLR 603
I and I (No 2) (1995) FLC 92-625
Kohan and Kohan (1993) FLC 92-340
Maker & Jets (No 3) [2012] FMCAfam 1104
Marinko & Marinko (1983) FLC 91-307
Munday & Bowman (1997) FLC 92-784
NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77
Penfold & Penfold (1980) 144 CLR 311
Prantage & Prantage (2013) FLC 93-545
Re Ragata Developments Pty Ltd v Westpac Banking Corp & anor (unreported Federal Court of Australia, Davies J, 5 March 1993)
Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court of Australia, French J, 3 May 1991)
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
Introduction
1On 20 February 2013 I published my Reasons for Judgment in the substantive proceedings between Ms [Baker] ("the wife"), Mr [Darzi] ("the husband") and the husband's mother, [Adriana Darzi] ("the third party"). On the same day, I made orders disposing of the proceedings. The orders gave the parties leave to apply for costs.
2I shall refer to the Reasons for Judgment as "the Judgment", and to the orders made pursuant to the Judgment as "the final orders".
3The wife duly applied for costs; the husband and the third party did not.
4The wife's application for costs is contained in her application in a case dated 11 March 2013. In essence, she seeks an order that "the husband or the third party pay (the wife's) indemnity costs of $78,774.17".
5The wife's application in a case was supported by her affidavit sworn 11 April 2013.
6Neither the husband nor the third party filed a response (or any other document) in answer to the wife's application for costs.
7The return date of the wife's application in a case was 20 May 2013. The wife and the husband attended on that day; the third party did not. According to the husband, the third-party was "in hospital".
8The wife and the husband both made brief submissions on 20 May 2013. Although the husband said that the costs application had not been served on him, he did not apply for the proceedings to be adjourned and did not object to the Court dealing with the application. He said that he has "no money", that he would like to see his children and that otherwise he had "nothing to say". Although he referred to an "application for bankruptcy", he confirmed that he was not a bankrupt.
9At the conclusion of the hearing on 20 May 2013, I reserved my decision in relation to the issue of costs.
Background
10The background to the parties' dispute is set out in detail in paragraphs 2 to 168 of the Judgment. It is unnecessary to revisit that summary.
The law
11The question of costs in family law proceedings is dealt with in s 117 of the Family Law Act 1975 (Cth) ("FLA"). A trial judge has a very broad discretion in costs matters.
12It is not the law that a costs order can only be made in what has been described as "a clear case". Although a finding of justifying circumstances is an essential preliminary to the making of a costs order, there is no additional or special onus on an applicant for an order for costs. The general rule is that each party shall bear his or her own costs (see FLA s 117(1)), but that rule is expressed to be subject to s 117(2), and it must yield whenever a judicial officer finds that there are circumstances which justify the making of a costs order: see Penfold & Penfold (1980) 144 CLR 311.
13Section 117(2) of the FLA provides as follows:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A) ... and the applicable Rules of Court, make such order as to costs ... as the court considers just.
14Section 117(2A) of the FLA provides as follows:
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
15The weight to be given to the various factors referred to in FLA s 117(2A) is a matter for the trial judge, but they must all be taken into account and balanced when considering whether the overall circumstances justify the making of a costs order: see I and I (No 2) (1995) FLC 92-625 and Hitch & Hitch (2012) 47 FamLR 603. On the other hand, there is nothing to prevent any of the factors being the sole foundation for an order for costs: see Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 191 FLR 294 at 130.
16A disparity in financial resources between parties to family law litigation can sometimes justify an order for costs in favour of the party with fewer financial resources. At the same time, the apparent inability of a party to pay costs is not a bar to a costs order being made in circumstances where – for example – that party's conduct (being, presumably, that party's conduct as a litigant) warrants such an order: see Marinko & Marinko (1983) FLC 91-307 and Cross v Beaumont (2008) 39 Fam LR 386; see also Hitch & Hitch (2012) 47 FamLR 603.
17Chapter 19 of the Family Law Rules 2004 ("the Rules") deals with costs between parties in family law proceedings. Rule 19.01(2) provides that a party may only recover costs from another party in accordance with the Rules or an order of the court. Importantly, a note to this rule reads as follows:
A self-represented party is not entitled to recover costs for work done for a case (except work done by a lawyer) but, if so ordered, may be entitled to recover some payments.
18There is no other reference to self-represented parties in Chapter 19 of the Rules.
19Rule 19.18 sets out various bases upon which costs may be assessed. The rule is as follows:
Method of calculation of costs
(1)The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3. ...
(2)If costs are payable under the 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/party basis.
(3)In making an order under subrule (1), the court may consider:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre‑action procedures; and
(f)expenses properly paid or payable.
20Schedule 3 to the Rules comprises an itemised scale of costs relating to specified types of work. The scale is revised from time to time.
21The "default" method for assessing costs is on a party/party basis: see r 19.18(2). It is unusual for this Court to make orders on any other basis, but there can be no doubt that it has power to do so – and r 19.18(1) says as much.
22Rule 19.34 sets out the principles that are to be applied by a registrar when assessing costs payable pursuant to a costs order. The rule is as follows:
Assessment principles
(1)A Registrar must not allow costs that, in the opinion of the Registrar:
(a)are not reasonably necessary for the attainment of justice; and
(b)are not proportionate to the issues in the case.
(2)If the court has ordered costs on an indemnity basis, the Registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to, among other things:
(a)the scale of costs in Schedule 3;
(b)any costs agreement between the party to whom costs are payable and the party’s lawyer; and
(c)charges ordinarily payable by a client to a lawyer for the work.
(3)When assessing costs as between party and party, a Registrar must not allow:
(a)costs incurred because of improper, unnecessary or unreasonable conduct by a party or a party’s lawyer;
(b)costs for work (in type or amount) that was not reasonably required to be done for the case; or
(c)unusual expenses.
23The law relating to indemnity costs has been reviewed very recently by the Full Court in Prantage & Prantage (2013) FLC 93-545. After observing that there is nothing in the FLA which inhibits the making of an order for indemnity costs and confirming that the law relating to such costs has been "well established in this jurisdiction for many years", the Full Court confirmed that the "usual rule" is that costs are awarded on a party/party basis and that an order for indemnity costs is "a very great departure from the normal standard": see Kohan and Kohan (1993) FLC 92-340 at 79,605.
24The Full Court was unwilling to reconsider the existing law to the effect that the "usual rule" is that costs are awarded on a party/party basis. The plurality (Thackray and Ryan JJ) wrote at [95]:
... the "usual rule" relating to the basis upon which costs are ordered in this jurisdiction is well entrenched. We consider it would be most unsettling if we purported to depart from the existing practice. Furthermore, we would not consider it desirable to do so ...
25The question arises, therefore, as to when it might be appropriate to make an order for indemnity costs. In Munday & Bowman (1997) FLC 92-784, Holden CJ wrote at 84,660-1 and 86,660 (some references omitted):
The authorities were conveniently summarised by Sheppard J in Colgate‑Palmolive Company and Anor vCussons Pty Limited (1993) 46 FCR 225. His Honour in that case summarised the position as follows:
(a)The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis.
(b)This has been a settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to Rules of Court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it.
(c)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.
His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis. Some examples which may be of relevance to the present case are as follows:
(a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts ... ;
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud ... ;
(c)Evidence of particular misconduct causing loss of time to the court and to other parties ... ;
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions ... ;
(e)An imprudent refusal of an offer to compromise.
As to the latter category of cases relating to a refusal to compromise, the authorities giving rise to that proposition are in the main New South Wales authorities. The Full Court warned in Kohan that this is in part attributable to the amendment of the Supreme Court Rules of that State which provide for indemnity costs where a plaintiff obtains judgment in terms no less favourable than those of an offer to compromise made by him and not accepted by the defendant.
Sheppard J in the Colgate-Palmolive case (supra) stated the position as follows:
There should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J. said in Tetijo Holdings Pty. Ltd. v Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991), "the categories in which the discretion may be exercised are not closed''.
His Honour went on to say:
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.
26The approach described by Holden CJ (relying, as it does, on Sheppard J's dicta in Colgate-Palmolive) remains good law. In Prantage at [49], however, the Full Court emphasised that Sheppard J referred to an "imprudent refusal of an offer to compromise", and not to imprudence by a party in his or her general approach to the proceedings. The former may be sufficient to enliven the power to award indemnity costs; the latter is not.
27The Full Court in Prantage at [102] also emphasised that there is no rule to the effect that indemnity costs will be ordered "where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation" (see NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [56]). The conduct of a party that is relevant to the issue of indemnity costs is that party's conduct as a litigant.
28I would add that it is, of course, the relevant party's conduct as a litigant to which the reference to conduct in FLA s 117(2A)(c) is directed, and not his or her conduct in other respects.
29In Hand and Bodilly (2013) FamCAFC 98, the Full Court appeared to accept that costs assessed on a lawyer and client (or solicitor/client) basis differ from, and provide a different level of indemnity to, costs assessed on a party/party basis (on the one hand) and costs assessed on an indemnity basis (on the other). The Full Court added, however, that, in some circumstances, an order for solicitor/client costs can provide a complete indemnity: see [100]. It then went on to say at [102]:
Costs on a “solicitor and client basis” have had different shades of meaning over the decades. Sometimes that discussion equates “solicitor and client” costs with “indemnity” costs but as Santow JA said in Bouras v Grandelis (2005) 65 NSWLR 214:
125.The weight of authority is that solicitor and client costs and indemnity costs are distinct, though the difference between them has been eroded by practice and by inconsistent amendments to the various legislative instruments that make up the costs assessment regime.
126.An order for solicitor and client costs will allow all reasonable costs or all costs as fair justice to the other party will allow. The onus of proving that the costs are reasonable falls on the receiving party.
127.Historically, solicitor and client costs were somewhat more generous than party/party costs....
30The New South Wales Court of Appeal in Bouras v Grandelis was primarily concerned with a question of statutory construction – being the question of the proper construction of certain provisions contained in the District Court Rules (2005) (NSW). Giles JA described the issue as follows:
1.... The essential question for decision is the meaning of “assessed on a solicitor and client basis” in Pt 39A r 25(4) of the District Court Rules; more particularly, whether the claimant was correct in her contention that it meant costs on an indemnity basis as described Part 39A, r 13 of the Rules ...
2.... [Costs] on a solicitor and client basis has been given differing content, sometimes equated with indemnity costs but often distinguished from costs on an indemnity basis. The decision in the present case does not turn on an historical or abstract meaning of “assessed on a solicitor and client basis”. It turns on the meaning of the phrase as used in Part 39A r 25 of the Rules.
31Given the context of the Court of Appeal's decision in Bouras v Grandelis, it seems unfortunate that the Full Court in Hand and Bodilly did not quote the entirety of paragraph 127 of the judgment. The paragraph is as follows:
127.Historically, solicitor and client costs were somewhat more generous than party/party costs. But now that the test for party/party costs is a fair and reasonable test under s208F (of the Legal Profession Act 1987 (NSW)), the gap between them has narrowed, if not disappeared altogether.
32At [91] of Hand and Bodilly, the Full Court said:
[The trial judge] quoted from A. G. Saddington, Taxation of Costs Between Parties (at 68), where the author explained the difference in the level of indemnity between party/party costs and solicitor/client costs in the following terms:
It appears, therefore, that on a taxation between parties on a solicitor and client basis, the unsuccessful party has to pay all the costs incurred by his opponent excepting in respect of (1) costs and expenses incurred prior to the institution of the action; (2) journeys and expenses of which the party liable could have no knowledge, and which would not ordinarily be performed or incurred; (3) the employment of more counsel, or the payment to them of larger fees than the circumstances of the case warrant, including the giving of special retainers.
33It is apparent that the method of assessment of solicitor/client costs referred to by the Full Court at [102] of Hand and Bodilly (in the passage quoted from Bouras v Grandelis) differs from the method of assessment referred to at [91] of the same judgment (in the passage quoted from A. G. Saddington, Taxation of Costs Between Parties). The Full Court did not indicate which of the two might be perceived to be the correct approach – perhaps because the trial judge had fixed costs in a specific amount (although calculated on a solicitor/client basis), and because the appeal itself was unsuccessful.
34At [142] of Prantage, the plurality said:
The issue that arises now is the basis upon which the costs should be assessed. The argument proceeded on the unstated assumption that the choice was between costs on an indemnity basis or costs on a party and party costs. The issue of the distinction between solicitor and client costs and indemnity costs was not raised and we therefore propose to say nothing on that topic, other than to observe that in Hand & Bodilly [2013] FamCAFC 98 this Court recently observed that the weight of authority is that solicitor and client costs and indemnity cost are distinct; albeit that an order for solicitor/client costs may, in some circumstances, provide a complete indemnity. Assuming that is the case, it would ordinarily be appropriate for a judge to consider awarding costs on a solicitor and client basis before awarding costs on an indemnity basis.
35Clearly, the above comment was obiter. In a separate judgment in Prantage, however, Murphy J implied that the Rules provide for a choice between costs on a party/party basis and costs on an indemnity basis – and that those are the only options. His Honour observed that the references in the Rules to costs on a solicitor/client basis (described as costs on a "lawyer and client" basis) have been repealed – save for the single reference in r 19.18(1)(b) to costs being assessed on a "lawyer and client" basis. Thus:
158.Despite the reference in r 19.18(1)(b) to “lawyer and client” costs as basis for an award, it should be noted that Pt 19.4 of the Rules (entitled “Lawyer and client costs”) and r 19.53 (headed “Lawyer as counsel – lawyer and client costs”) were each repealed by amendments in 2008. Rule 19.34 was amended by those same amendments in 2008. The current r 19.19 was inserted by subsequent amendments in 2008.
159.Rule 19.34 seeks to distinguish between the amounts embraced by an assessment of “costs on an indemnity basis” and “party and party” costs (rr 19.34(2) and (3) respectively).
160.Absent an order by a Judge, r 19.19 “caps” the amounts of party and party costs to those provided for in Sch 3. Rule 19.34 provides that a Registrar “must not allow costs” which are not “reasonably necessary for the attainment of justice” (r 19.34(1)(a)) and which “are not proportionate to the issues in the case” (r 19.34(1)(b)). The rule is not, in terms, confined to party and party costs; the rule refers merely to “costs”. “Costs” is defined to mean “…an amount paid or to be paid for work done by a lawyer, and includes expenses.” No distinction is made between “party and party costs” and “indemnity costs” in r 19.34(1) and neither expression is defined. Accordingly, the prohibition contained in r 19.34(1) would appear to apply equally to either party and party costs or indemnity costs (an interpretation reinforced by r 19.19 and its terms and by the fact that r 19.34 goes on to make separate provision for indemnity costs (r 19.34(2)) and party and party costs (r 19.34(3)).
36At [163] of Prantage, Murphy J said:
... [Absent] other order or agreement between the parties, an order that one party should pay the costs of the other on an indemnity basis brings with it stipulated parameters governing the quantum of any such costs:
(a)Rule 19.34(1) provides that any item/s assessed as “not reasonably necessary for the attainment of justice” or “not proportionate to the issues in the case” must be disallowed;
(b)Rule 19.34(2) mandates the costs that must be allowed but limits those to costs “reasonably incurred” and, if reasonably incurred, of a “reasonable amount”; and
(c)the same rule mandates the (non-exclusive) matters to which regard must be had in assessing whether the amount is reasonably incurred and, if so, whether any individual amount is reasonable:
•The Sch 3 scale of costs;
•“[A]ny costs agreement between the party to whom costs are payable and the party’s lawyer”;
•“[C]harges ordinarily payable by a client to a lawyer for the work.”
37Regrettably, the Full Court in Hand & Bodilly did not discuss the provisions of Chapter 19 of the Rules – although reference was made to passages from the judgment at first instance in which the trial judge applied some of the rules contained in the Chapter: see [90] and [93] of Hand & Bodilly. The only provision of the Rules dealing with costs mentioned by the Full Court when dealing with the grounds of appeal was r 19.04(6), which is not presently relevant: see [109] of Hand & Bodilly. It follows that the concerns raised by Murphy J in Prantage regarding the question of whether an award of costs on a solicitor/client basis remains an option under the Rules were not considered.
38Murphy J in Prantage also emphasised that comments to the effect that indemnity costs are "a very great departure" from what might be regarded as the normal or usual standard do not comprise "a fetter" on the court's discretion to award indemnity costs if it considers it just and appropriate to do so. The normal or usual standard in family law proceedings recognises that the "default position" is that each party must bear his or her own costs. The normal or usual standard in family law proceedings where costs are ordered, is that the costs are to be assessed on a party/party basis.
39I accept the guidance of the plurality of the Full Court in Prantage to the effect that it would ordinarily be appropriate for a judge to consider awarding costs on a solicitor/client basis before awarding costs on an indemnity basis. The precise manner in which costs awarded on such a basis are to be assessed, however, is not as clear as it could be. The assessment principles set out in r 19.34 focus on the manner in which assessments of costs on a party/party basis and on an indemnity basis are to be approached. They give no guidance as to the manner in which an assessment of costs on a solicitor/client basis is to be approached. Murphy J was clearly of the view that such an omission was deliberate. In those circumstances, and in the light of the matters discussed elsewhere in these Reasons, I would be reluctant to award costs on a solicitor/client basis. In other words, I have considered awarding costs on a solicitor/client basis but have formed the view that an order to that effect would not be just – if for no other reason than it is likely to condemn the parties to a further protracted dispute regarding the assessment principles that should adhere to such an order. In any event, and as I have explained below, there are compelling reasons for the making of an order for indemnity costs in the circumstances of this case.
40Before dealing further with the wife's application for costs, I record that the wife was self-represented at trial, as was the husband. The husband's mother did not participate actively in the proceedings. In Casley & Casley (2010) FLC 93-449, O'Ryan J (sitting as a single member Full Court, on an appeal from a Federal Magistrate) said at [35]:
... it is well established that a litigant in person may seek an order for costs pursuant to s 117(2) of the [FLA]. Such a litigant will not recover an amount for time spent in preparing and conducting his or her case. However, such a litigant may recover disbursements being out of pocket expenses which would have been recoverable had he or she been legally represented.
41The passage from Casley quoted in the previous paragraph is clearly good law: see Cachia v Hanes (1994) 179 CLR 404.
Section 117(2A) considerations
42I turn now to consider the various matters referred to in s 117(2A).
The parties' financial circumstances
43I discussed the parties' financial circumstances, in detail, in the Judgment. The effect of the final orders is summarised at [421] of the Judgment.
44The husband submitted that he has "no money" and that, as a result, he is unable to meet any costs order that the Court might be minded to make. The effect of the findings made in the Judgment, however, is that the husband retained (or retained the benefit of) property to the value of nearly $616,000 – after taking into account his liabilities.
45I am not aware of the third party's financial circumstances, save that she owns the property in which she lives. Because she did not participate, or participate effectively and constructively, in the proceedings, there is no evidence that she cannot afford to pay any costs order that the Court might be minded to make.
Whether any party was in receipt of legal aid
46None of the parties was in receipt of legal aid.
The conduct of the parties in relation to the proceedings
47As explained above, this factor requires the Court to have regard to the parties' conduct as litigants. It is under this general heading that the wife's submissions are concentrated.
48The wife submitted that the conduct of the husband and the third party has caused her to incur unnecessary costs. She argued that the husband and the third party –
a)failed to provide full and frank disclosure;
b)failed to comply with subpoenas;
c)failed to comply with orders of the Court;
d)falsely represented to the Court that a loan existed between them;
e)attempted to "rewrite history" by reconstructing the financial dealings that had taken place between them; and
f)delayed the proceedings on the basis that they intended to obtain legal advice.
49At [258(g)] of the Judgment, I said:
Frequently during the course of his evidence, the husband would refer to documents that he alleged the wife had seen, but which were either not attached to his affidavit material or not brought to the Court’s attention in any structured or sensible fashion. It is clear beyond argument that such disclosure as the husband made was incomplete, unstructured and frequently delayed. It was the wife’s case that this inadequate disclosure was deliberate, and effectively a tactic from the husband’s point of view. There can be no doubt that the husband is an intelligent and capable man; and he is an accountant by training. He is anything but commercially naive. In all the circumstances, the only reasonable inference that can be drawn from the preponderance of the evidence is that the wife’s assessment is correct. In other words, I find that the husband’s incomplete, unstructured and frequently delayed disclosure was deliberate, and was intended to impede the effective presentation of the wife’s case.
50At [319] of the Judgment, I said:
The wife’s case is that the husband has consistently failed or refused to disclose documents relating to his financial position, and that when there has been disclosure, it has been both late and incomplete. I agree with the wife’s submissions in that regard and find that the husband failed to make full and frank disclosure of his financial position in a timely fashion.
51I provided a number of examples to support the above finding.
52At [320] of the Judgment, I said:
In a similar fashion, the husband failed to provide current and unambiguous evidence regarding a number of matters by, in essence, either raising issues himself or endeavouring to deflect issues raised by others and then, seemingly, ignoring the issues or (to use another colloquialism) running dead on them.
53I also provided examples to support this finding.
54At [324] and [326] of the Judgment, I said:
Put shortly, I am more than satisfied that the whole truth has not come out as it relates to the husband’s financial position and that, instead, the Court has caught no more than a glimpse of the husband’s actual financial circumstances as the curtain has metaphorically parted from time to time. That the Court was able to see even that much was due, in very large part, to the wife’s determination to investigate the husband’s affairs and her desire to hold him to account. In spite of the husband’s attempts to explain the dire nature of the predicament in which he asserted he found himself at or around the time of separation, his reasons for ceasing to pay credit card debts, mortgage payments, lease or loan payments associated with the wife’s Range Rover, utilities for [Property A] and other payments remain incomprehensible. Put another way, his actions – which led to the loss of [Property A], [Property E], [Property C], the Range Rover and other property – were both unjustified and unjustifiable. The Court can realistically draw only one conclusion from the husband’s behaviour (having regard to all the evidence before it, including the husband’s extraordinary conduct as a litigant and, at times, bizarre presentation – according to the transcript, at least – in court). That conclusion is to the effect that the husband is a rude, coarse, and vindictive man who, regrettably, is so determined to punish the wife for her profligacy (or what he perceives is her profligacy) and other real or imagined, but never particularised, shortcomings that he is quite prepared to cut off his nose to spite his face.
...
So disorganised was the case before the Court, and so successful was the husband in obfuscating his financial position (which appears to have been his primary objective in the litigation – given that no other coherent objective is apparent, apart from punishing the wife as discussed above) that it is difficult to assess the likely value of the husband’s property which remained undisclosed. ...
55The findings made in the passages from the Judgment quoted above are strong and relate directly to the husband's conduct as a litigant. Indeed, at [266] of the Judgment, I said:
... I am not seeking to equate the wife’s conduct as a litigant (or, indeed, her behaviour generally) with that of the husband. The husband was an appalling witness; the wife was not. The husband set out to confuse and obfuscate; the wife did not. The husband failed or refused to comply with orders of the Court; the wife did not. The husband effectively abandoned his financial responsibilities to his children; the wife did not. And the list does not end there. I am acutely aware that – metaphorically, of course – the husband waged the forensic and procedural equivalent of guerrilla warfare against the wife during the course of the proceedings. The husband had many months to prepare and present a sensible and reasoned analysis of pre- and post‑separation financial activities. In my opinion, he made no attempt (or no reasonable attempt) to do so. ... When he had the opportunity of producing evidence to support his version of transactions or financial arrangements that had been called into question ..., he failed to do so, or failed to do so in a comprehensive manner. As recorded elsewhere in these Reasons, he could have and should have obtained admissible evidence from his parents (and, after his father’s health deteriorated, from his mother) regarding the alleged loan. I find that the husband’s attitude to this issue – and to many other significant issues raised during the course of the proceedings – was (and once again to use a colloquialism): “Catch me if you can”.
56In the circumstances, I agree with the wife's submissions to the effect that the husband failed to provide full and frank disclosure, and that he failed to comply with orders of the Court. It is unnecessary for me to consider whether he failed to comply with subpoenas.
57As an example of the husband's failure to comply with orders, the wife referred to the husband's actions surrounding the sale [of] [Property A]. At [301] of the Judgment, I said:
One of the orders made on 29 June 2009 was to the effect that [Property A] be marketed through [A Pty Ltd] – and not [Smith & Jones]. In paragraph 52 of her affidavit sworn 17 May 2010, the wife said that “it is obvious from the communication between [the husband and Mr [Smith]] that [the husband’s] frustration at [Smith & Jones’] respect for the orders of the Court lead to his desire for a new agent”. I agree with the wife in that regard. I also agree with the wife that “the sale of [Property A] was held up for at least four and a half months by [the husband’s] frivolous actions”
58In support of her submission to the effect that the third party failed to comply with subpoenas, the wife referred to a subpoena to the third party filed 11 February 2010. She submitted, and I accept, that the third party failed to comply with the subpoena.
59The wife also submitted that – pursuant to a subpoena filed on 1 June 2010 – the third party was required to attend court on 28 June 2010 to give evidence. The third party failed to appear on that day.
60I referred to the third party's failure to attend court on a subsequent occasion at [270] of the Judgment:
After the proceedings were adjourned from 30 June 2010 to 6 July 2010, the husband provided documents purporting to explain why his parents could not attend on 6 July 2010 to give evidence. I accept that his father was not sufficiently well to attend, but given the importance of the alleged loan made by the husband’s parents for the purchase of [Property A], I am not prepared to accept that the husband’s mother was incapable of giving evidence on 6 July 2010 (or at some later time) – by telephone or in person – without sworn evidence in support of that proposition.
61The third party's involvement in the proceedings was related to the assertion by the husband that the payment to his parents of $409,800 from the net proceeds of sale of Property A comprised the repayment of a loan, together with interest. The husband caused the payment to be made in October 2009. I found that the loan did not exist, and hence that no interest was payable: see [304] to [308] of the Judgment. In relation to the payment itself, I said at [307]:
... It is probable that the husband’s motivation in making the payment of nearly $410,000 to his parents on the sale of [Property A] was to endeavour to remove funds from the pool of property that might otherwise have been available for distribution between the parties, with a view to preventing the wife from making any possible claim to those funds, or a part of them. Put simply, his purpose in making the alleged repayment (including interest allegedly owing) was to defeat the wife’s anticipated claims. I find that the husband well knew that the alleged loan was not and could never be proved to be a legally enforceable “loan” and that, as a result, he set out to reconstruct his financial dealings with his parents and, when the need to do so was perceived, to “rewrite history” as part of the highly artificial reconstruction process.
62I dealt with the significance of the failure to provide any direct evidence from the husband's parents (and, relevantly, the third party) regarding the alleged loan and its repayment at [269] of the Judgment:
Perhaps the most striking feature of this aspect of the proceedings was the husband’s failure to provide any direct evidence from his parents (or either of them) regarding the alleged loan and its repayment. Although the husband’s father was clearly very ill at the time of the trial in June 2010, no reason (or no satisfactory reason) was ever provided as to why the husband could not have obtained affidavits from his parents at a much earlier stage. Although at times the husband professed not to understand court proceedings, he is anything but commercially naive. Annexure C to his trial affidavit reveals that the husband felt more than competent to “argue the toss” (as it were) with the wife’s former solicitors, and that he was quite capable of producing what he perceived to be relevant documents when he was minded to do so. The reality is, however, that his explanations regarding the amount of the alleged loan were inconsistent (as discussed elsewhere in [the] Reasons) and that the documents produced to support his explanations were inadequate for that purpose.
63As indicated above, the wife also submitted that the husband and the third party intentionally delayed the proceedings on the basis that they intended to obtain legal advice. I agree with the wife's submission in this regard. The subject was dealt with at [118] to [120] of the Judgment as follows:
[The] various comments made to the Court by the husband and [the third party] regarding [the third party's] intention to be legally represented and the actuality of that representation were misleading. ...
There was, of course, absolutely no reason why [the third party] could not have obtained legal advice from any firm of solicitors she chose. The husband could easily have assisted her in that regard, given that he had previously been represented by solicitors himself and given that he had instructed [T Law Firm] to prepare the unregistered mortgage over [Property A]. If the firms of solicitors with whom the husband had dealt could not or would not act for his mother, they would have referred her to other solicitors who could and would.
The husband, the wife and [the third party] were all present at the hearing on 2 May 2011. Once again, [the third party] was unrepresented ... [and] the wife was correct when she said that [the third party] had been given ample opportunity to engage a lawyer and that she and her son were “just using this to prolong the proceedings.”
64In summary, the husband's conduct as a litigant was appalling. I described that conduct at [206] of the Judgment, which I have quoted above. One sentence of that paragraph, however, is worth repeating:
I am acutely aware that – metaphorically, of course – the husband waged the forensic and procedural equivalent of guerrilla warfare against the wife during the course of the proceedings.
65The third party's conduct as a litigant was little better.
Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court
66This does not appear to be a relevant consideration, and the wife does not suggest that it is.
Whether a party has been wholly unsuccessful
67The orders sought by the parties were summarised at [177] to [182] of the Judgment. It is clear that the husband was unsuccessful in obtaining the orders that he sought. It is also clear that the husband and the third party were unsuccessful in their argument to the effect that the alleged loan of $409,800 was valid and enforceable.
68Indeed, it is fair to say that the husband and the third party were spectacularly unsuccessful in the proceedings.
69That is not to say, however, that the wife was wholly successful in obtaining the orders that she sought. She was not, but the Parliament has directed the Court's attention to a party's lack of success in preference to a party's success in the proceedings. As Thackray J said in Hawkins & Roe (2012) 47 FamLR 526 at [161], "even a meritorious case can be 'unsuccessful' when the other case is found to have greater merit". It must be said that ‘meritorious’ is certainly not an adjective that springs to mind when considering the husband's case (and the third party's case) in the current proceedings.
Whether an offer to settle was made
70This does not appear to be a relevant consideration, and the wife does not suggest that it is.
Other relevant matters
71To the extent that it may not be directly relevant to the husband's conduct as a litigant, it is appropriate that I repeat the following passage from the Judgment at [324]:
... The Court can realistically draw only one conclusion from the husband’s behaviour (having regard to all the evidence before it, including the husband’s extraordinary conduct as a litigant and, at times, bizarre presentation – according to the transcript, at least – in court). That conclusion is to the effect that the husband is a rude, coarse, and vindictive man who, regrettably, is so determined to punish the wife for her profligacy (or what he perceives is her profligacy) and other real or imagined, but never particularised, shortcomings that he is quite prepared to cut off his nose to spite his face.
72In such circumstances, it is not inappropriate to presume that the husband conducted the proceedings in the manner that he did "for some ulterior motive or because of some wilful disregard of the known facts": see my discussion of Munday & Bowman (1997) FLC 92-784 above. Put another way, in his conduct of the proceedings the husband was motivated by his anger and resentment towards the wife, and not by a desire or willingness to assist the Court to understand and fairly determine the relevant issues in the property settlement proceedings, and to make orders which might be considered just and equitable.
73In Maker & Jets (No 3) [2012] FMCAfam 1104, I said at [84]:
In broad terms, the general law is to the effect that it is just and reasonable that someone who causes a person to incur legal costs should reimburse that person for those costs: see, for example, Latoudis v Casey (1990) 170 CLR 534. Costs (relevantly, party and party costs) are compensatory, in the sense that they intended to partially indemnify a successful litigant against his or her liability for legal costs. In other words, they are compensatory, not punitive: see Braithwaite (2007) FamCA 468. To that extent, "punishment" and "penalty" are not relevant considerations. Indeed, they are fraught concepts, given that a successful litigant who has fought long and hard through the court system to clear himself or herself of serious and perhaps malicious allegations that may have been made against him or her (which allegations may have the most profound effect on his or her relationship with his or her children, or on his or her financial well-being) might fairly consider that a reluctance of the part of the Court to order costs in his or her favour is tantamount to being punished, or penalised, for having chosen to litigate instead of, say, to metaphorically “walk away”.
74In other words, when considering whether it is just to make an order for costs, the Court is not concerned with "punishing" the husband or the third party for their behaviour, or for the fact that they were unsuccessful in the proceedings; nor is the Court concerned that the husband and/or the third party may have been "guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation" (see [27] of these Reasons). The Court is obliged, however, to consider whether there are circumstances that justify the making of an order for costs – and if so, what a just order as to costs might comprise.
Conclusion
75In my opinion, it is clear beyond argument that there are circumstances which justify the making of an order for costs in the wife's favour. The most significant of those circumstances are:
a)the conduct of the husband and (to a lesser extent) the third party as litigants; and
b)the fact that the husband and (to a lesser extent) third party have been wholly unsuccessful in the proceedings.
76There can be no doubt that the husband's (appalling) conduct as a litigant eclipses all other relevant considerations.
Indemnity costs
77I am conscious that the Court should not depart lightly from the ordinary rules relating to costs between party and party, and that the circumstances justifying any such departure should be exceptional in nature. I have discussed the extent to which indemnity costs amount to "a very great departure" from the usual basis upon which costs are assessed.
78I am also conscious of what were described by the plurality in Prantage (quoting from the judgment of Cooper and Merkel JJ in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151) as "two seemingly irreconcilable objectives". The plurality said at [96] and [97]:
Placing great emphasis on the importance of one objective, namely "relieving a successful litigant from the burden of costs which that litigant should not have been required to incur" will inevitably lead to insufficient emphasis being placed on the importance of the other objective of "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".
... [Once] it is recognised that ensuring access to justice is one of the key objectives of the "usual rule" [to the effect that costs should be awarded on a party/party basis], the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
79In the present case, I am more than satisfied that the circumstances justifying an order for costs are unusual, and exceptional in nature. Indeed, and bearing in mind the findings that I have made regarding, in particular, the husband's conduct as a litigant, it is difficult to conceive of a case more deserving of an order for indemnity costs. I have recorded that the husband's conduct of the proceedings was motivated by his anger and resentment towards the wife, and not by a desire or willingness to assist the Court to understand and fairly determine the relevant issues in the property settlement proceedings, and to make orders which might be considered just and equitable. In other words, the husband continued to litigate "for some ulterior motive": see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1998] 81 ALR 397. It is also fair to conclude that he continued the proceedings in "wilful disregard of the known facts": see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1998] 81 ALR 397.
80There can be no doubt that the husband's misconduct as a litigant caused loss of time to the court and to the wife: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court of Australia, French J, 3 May 1991). Similarly, the husband made allegations which ought never to have been made and prolonged the case "by groundless contentions" (such as, for example, in relation to the alleged loan from his parents): see Re: Ragata Developments Pty Ltd v Westpac Banking Corp & anor (unreported Federal Court of Australia, Davies J, 5 March 1993).
81I conclude, therefore, that there are circumstances that justify the making of an order for costs and that those circumstances are so unusual and so exceptional as to justify the making of an order for costs on an indemnity basis. For the reasons that I have discussed above, I have considered awarding costs on a solicitor/client basis, but have formed the view that such an award would not be just. As I have already recorded, this is a case which effectively cries out for an order for indemnity costs.
82The question arises, however, as to the form of the order for indemnity costs.
Form of order
83The wife has sought a full indemnity (as it were) for the costs paid to her solicitor between 1 September 2008 and 16 August 2010. Those costs amounted to $78,774.17. Annexure A to the wife's affidavit sworn 11 April 2013 comprises a Debtor Statement and Trust Ledger/Statement of Account from the wife's solicitors, addressed to the wife. Although the documents reveal that the wife has paid the total amount of $78,774.17, the invoiced items are not particularised. Similarly, it is not possible to tell from the information provided by the wife in support of her application for costs whether she had signed a costs agreement with her solicitors (and, if so, whether the invoiced costs were in accordance with an agreement).
84Rule 19.08(3) of the Rules provides that a party applying for an order for costs on an indemnity basis "must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement". I do not have that information.
85It follows from the above that I am unable to fix the quantum of costs payable on an indemnity basis. As a result, I have concluded that I should order that the wife's costs be assessed (on an indemnity basis) by a Registrar in accordance with the Rules: see r 19.18(1)(b).
86Pursuant to r 19.34(1), the Registrar must not allow costs that, in his/her opinion, are not reasonably necessary for the attainment of justice and not proportionate to the issues in the case. Rule 19.34(2) provides as follows:
If the court has ordered costs on an indemnity basis, the Registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to, among other things,
(a)the scale of costs in Schedule 3;
(b)any costs agreement between [the wife] and [the wife's lawyer]; and
(c)charges ordinarily payable by a client to a lawyer for the work.
87A further question arises as to the apportionment of costs between the husband and the third party. Although the third party's conduct as a litigant was only marginally less reprehensible than that of the husband, her role in the proceedings was a lesser one. Put another way, the vast majority of the costs incurred by the wife resulted from the husband’s conduct as a litigant. Still, the largest single issue in the proceedings related to the validity of the alleged loan owed by the husband to his parents. In relation to this issue, the third party's conduct as a litigant was not dissimilar to that of the husband.
88Doing the best that I can with the information available to me, I have concluded that the third party's liability should be limited to 30 percent of the total of the wife's costs as assessed on an indemnity basis. The third party should be jointly and severally liable with the husband for that proportion.
89Thus, the husband should be solely liable for 70 percent of the total of the wife's costs as assessed on an indemnity basis, and jointly and severally liable with his mother for the remainder.
Orders
90The orders that I propose to make are as follows:
a)Subject to (b) and (c) below, the husband and the third party must pay the wife's costs of and incidental to the proceedings on an indemnity basis ("the indemnity costs").
b)In the event of the parties failing or refusing to agree the quantum of the indemnity costs within 21 days from the date of these orders, the indemnity costs be assessed by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004.
c)The husband and the third party must pay the indemnity costs in the following proportions:
i)70 percent of the indemnity costs are to be paid by the husband; and
ii)the remaining 30 percent of the indemnity costs are to be paid by the husband and the third party, who are to be jointly and severally liable for the said 30 percent of the indemnity costs.
I certify that the preceding [90] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
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