Barajas & Frye (No 2)
[2024] FedCFamC1F 200
•3 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Barajas & Frye (No 2) [2024] FedCFamC1F 200
File number: SYC 5751 of 2022 Judgment of: MCGUIRE J Date of judgment: 3 April 2024 Catchwords: FAMILY LAW - COSTS - Application by wife seeking an order that the husband pay the costs of a Review Application on an indemnity basis - Order that husband pay wife’s costs on a party and party basis Legislation: Family Law Act 1975 (Cth) ss 117 and 117(2A) Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Munday v Bowman (1997) FLC 92-784
Sfakianakis & Sfakianakis (2019) 59 FLR 419; [2019] FamCAFC 54
Division: Division 1 First Instance Number of paragraphs: 40 Date of hearing: 12 March 2024 Place: Hobart via Microsoft Teams: delivered Melbourne Counsel for the Applicant: Ms Watson Solicitor for the Applicant: Watson Law Pty Ltd Counsel for the Respondent: Mr Manning Solicitor for the Respondent: Maning Lawyers ORDERS
SYC 5751 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS FRYE
Applicant
AND: MR BARAJAS
Respondent
ORDER MADE BY:
MCGUIRE J
DATE OF ORDER:
3 APRIL 2024
THE COURT ORDERS THAT:
1.Mr Barajas ‘the husband’, pay Ms Frye’s (‘the wife’) costs of and incidental to the Application for Review filed 28 July 2023, subsequently amended 19 August 2023 and the Application in a Proceeding filed by the wife on 11 October 2023 in a sum of $20,000 such to be paid within 30 days of the date of these Orders.
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 the pseudonym of Barajas & Frye has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
McGuire J:
APPLICATIONS
On 7 December 2023 I handed down orders and Reasons on a Review Application brought by the husband, Mr Barajas,[1] in respect of orders by a senior judicial registrar (“SJR”) made 28 July 2023 providing inter-alia that the husband pay to the wife interim spousal maintenance in a quantum of $1,270 per week.
[1] “The husband”.
My orders confirmed the decision of the SJR. The husband’s obligation for interim spousal maintenance was back dated to 3 February 2023 with the husband given four calendar months to make payment of the arrears.
The wife, Ms Frye,[2] sought other orders of an injunctive nature in respect of the business operated by the husband but of which the wife is a 50 per cent shareholder. She was unsuccessful in that part of the application.
[2] “The wife”.
The wife seeks that costs be awarded on an indemnity basis calculated at $29,249.
The application is opposed. Alternatively, counsel for the husband argued that should the Court be persuaded towards an order for costs then such costs should be awarded only on a party/party basis in accordance with more general practice.
RELEVANT BACKGROUND
The parties commenced cohabitation in 2013 and were married in 2014.
There is one child of the parties being X (aged eight years). X lives primarily with the wife. The husband contributes $60 per week child support for X.
The wife has three children from a previous relationship and two of those continue to live in the wife’s family unit where one of the children, E (aged 14), remains dependant.
During the relationship the parties operated a business, C Company. The parties are equal shareholders. The husband is the sole director. The husband terminated the wife’s employment on 12 September 2022.
The business was incorporated as B Pty Ltd in mid-2020.
The evidence is that the wife receives no direct dividend or other income from the business and hence the application for spousal maintenance.
The husband commenced substantive proceedings in this Court in August of 2022.
The SJR made orders inter-alia on 28 July 2023 for the husband to pay interim spousal maintenance in a quantum of $1,270 per week to the wife and until further order with the first payment to be made by 4:00pm on 28 July 2023. The husband sought a Review of that decision.
RELEVANT LAW – COSTS
Matters of costs are provided for at s 117 of the Family Law Act 1975 (Cth) (“the Act”) where there is a general rule at subsection (1) that each party to proceedings under this act shall bear his or her own legal costs. That general rule is, however, subject to a discretion being available for a court to make an award for costs if there are justifying circumstances. The term “justifying circumstances” should not be read as synonymous with “extraordinary circumstances”.
At subsection (2A) and in considering whether, and what, if any, orders should be made for costs under subsection (2), the Court is mandated to have regard to the following factors:
(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 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, and 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 proceeding;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
The discretion in the Court to make an order for costs is a wide one but conditional upon the finding of justifying circumstances. The factors at subsection (2A) are considerations and not mandatory requirements in the sense that the Court is not required to be satisfied as to all of the factors in the subsection.
The applicant wife here seeks orders on an indemnity basis rather than the more common party/party basis. The Full Court in Kohan & Kohan[3] observed that a court:
… should not depart lightly from the ordinary Rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. …
[3] (1993) FLC 92-340 at 79,614; [1992] FamCA 116.
Similarly, Sheppard J in the well-known case of Colgate-Palmolive Co and Anor v Cussons Pty Ltd[4] opined that there should be:
… “special or unusual feature in the case to justify the Court in departing from the ordinary practice”. …
[4] [1993] FCA 801; (1993) 46 FCR 225.
Following a consideration of Colgate-Palmolive Co and Anor v Cussons Pty Ltd a Full Court of the Family Court in Munday v Bowman[5] assisted trial judges by extracting some examples of circumstances which would warrant the exercise of the discretion at subsection (2A) of the discretion towards an award of indemnity costs and including:
(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.[6]
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud.[7]
(c)Evidence of particular misconduct causing loss of time to the court and to other parties.[8]
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.[9]
(e)An imprudent refusal of an offer to compromise.
[5] (1997) FLC 92-784 at 84-660 (Holden CJ).
[6] Citations omitted.
[7] Citations omitted.
[8] Citations omitted.
[9] Citations omitted.
Nevertheless, there remains a discretion to make an order for indemnity costs as emphasised by the Full Court in Sfakianakis & Sfakianakis[10] where their Honours said:
9.The ordinary position in proceedings under the Family Law Act 1975 (Cth) (“the Act”) is that each party is to bear his or her own costs (s 117(1)). Where the Court is of the opinion that circumstances justify it in doing so, the Court may make such order as to costs as it considers just (s 117(2)). Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional…
10.It is, however, a mistake to think that if a costs order is made, that order can only be on a party and party basis or on an indemnity basis. The words “such order as to costs … as the court considers just” permit the Court to fashion an order that is apt to the circumstances. One such well-known example is assessment on a trustee basis, which is more generous than party and party costs, but falls short of an indemnity. Orders for a partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order. For convenience, in these reasons we shall refer to such orders as a “special costs order”.
CONSIDERATION
[10] (2019) 59 FLR 419; [2019] FamCAFC 54.
Section (2A)(a) the financial circumstances of each of the parties to the proceedings;
The wife is not in employment. She has the care of the parties’ eight year old daughter. The wife receives just $60 per week for child support. She does not receive dividends or income from the business despite her shareholding. She does, however, continue to live in the former matrimonial home.
The husband’s sworn Financial Statement of 14 November 2023 discloses an income from all sources of $1,384 per week and expenditure of $1,258 per week. I found, however, some discrepancies and omissions in his evidence as to his detailed financial situation. The husband retains the benefit of the business and its corporate entity. Despite his claims as to financial difficulty, he continues to operate the business. He was able to direct expenditure of $74,000 – $123,000 to Supreme Court litigation involving the wife and her son and since separation.
The 2023 Company Financial Statements indicate a loss for the year of $10,487.
Counsel for the husband in this argument as to costs again raises the husband’s current capacity to immediately meet any costs order and suggests that, should there be an award for costs, then payment be delayed until settlement of the parties substantive financial litigation in circumstances where the husband’s claimed financial situation remains untested by full cross‑examination and where the wife remains in residence of the major asset of the parties being the former matrimonial home.
Section 117(2A)(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;
Neither party receives legal aid.
Section 117(2A)(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;
The wife’s counsel in written submissions argues that the husband’s conduct in commencing Supreme Court action where perhaps those issues may have been encompassed in the extant family court proceedings is an example of relevant conduct towards a cost order on the Review Application. I disagree. There is no nexus.
There are no other issues of conduct that impact my consideration here.
Section 117(2A)(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
The husband had the benefit of the orders and Reasons of the SJR but chose to make Application for Review. Nevertheless, the Act and Rules[11] allow this process of Review as a hearing de novo as distinct from the requirements of an Appeal. As such, the husband was simply availing himself of a process accessible under the legislation.
Section 117(2A)(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
[11] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
The wife’s written submissions suggest that she has been wholly successful in the husband’s Application for Review of the spousal maintenance order made by the SJR on 28 July 2023, and, as such, the husband was wholly unsuccessful on the Review Application initiated by him. This submission, is not, however, strictly correct. The wife on the application before me raised additional and separate issues in respect of injunctive orders. She did not obtain those orders. Consequently, it cannot properly be argued that the husband was “wholly unsuccessful” although it is the case that the wife was, in my view, substantially successful in what eventuated as the major issue for the Courts determination. Notably, other matters were resolved by consent during the Review process.
Section 117(2A)(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;
This is not a relevant consideration.
Section 117(2A)(g) such other matters as the court considers relevant.
Where circumstances of a justifying kind are the fundamental basis for exercising the discretion towards a costs order, I am of the view that the circumstances of the Review proceedings are relevant. That is, as opposed to an Appeal which requires an assertion and ultimate finding of mistake of law or fact, a party having the benefit of the consideration and determination of a registrar may simply return to court on Review for a de novo hearing. Where costs are obviously accrued at both the original and Review stage, the circumstances differ, in my view, than a consideration of costs on a simple first instance judgment. In this matter, the husband had the benefit of the considered Reasons and orders of the SJR and chose a hearing de novo without specifically asserting any error in the first instance judgment. In doing so he jeopardised both himself and the other party in respect of costs. This is, in my view, a relevant consideration.
Undoubtedly, any costs incurred by the wife in this Review Application would be an onerous impost given that she does not have employment, does not receive benefits from the business of which she is a shareholder, and has the care and primary financial support for X. The husband’s financial situation is less known. I did not accept the accuracy in full of his sworn Financial Statement. He continues to operate the business. Notably, where the husband was able to find at least $74,000, and perhaps more, to instigate Supreme Court litigation suggests an availability of funds.
Significantly, in my view, is that the husband instigated this application as a Review when armed with the informed Reasons of the SJR. The focus of the submissions and I infer, therefore, the application was the wife’s application for interim spousal maintenance. In this sense, the husband was unsuccessful in reviewing the Registrar’s decision. I accept, however, that other matters were raised in the litigation before me and where ultimately the wife was not successful in obtaining the orders she sought.
Finally, I repeat that the circumstances and context of a Review Application are, in my view, irrelevant. Whilst the process is available to a party, it is one where that party has already had the benefit of a judicial determination.
In taking all of those matters into account, I am of the view that there are justifying circumstances that there should be an award for costs to the wife.
I am not satisfied, however, that the costs should be awarded on an indemnity basis in the sense that I am not persuaded there are exceptional circumstances. The legislation allows the husband to bring the Review Application. The wife raised matters on which she was unsuccessful. Whilst the husband was armed with the determination of the SJR, I am not persuaded that his application was brought in circumstances without any merit or reasonable argument. For instance, the husband argued that the wife may have had the capacity for some employment so as to mitigate her own financial circumstances. He referenced that the wife had the use of the major asset of the parties being the former matrimonial home. He argued, albeit unsuccessfully, that his financial circumstances were such that he could not meet an order for spousal maintenance and noting that there appears to be an assessment from another body, namely the Child Support Agency, where the husband’s assessment is limited to $60 per week allowing an inference to limited income.
I am of the view, therefore, that the costs award should be on a party/party basis.
Following the taking of submissions in respect of this costs application, and at my request, the solicitors for the wife provided a table of costs drawn on a party/party basis including counsel’s costs and fees and totalling $27,549.50.
I take into account again that the wife was not successful in obtaining the totality of the orders sought. I note that, at my instigation, the matter was adjourned from its first listing due to the Court requiring some limited cross-examination. Taking those matters into account, I am of the view that the costs order should be in a quantum of $20,000 and I will order accordingly.
The husband’s counsel sought a delay in payment of any costs order that might eventuate. I have again considered the husband’s financial circumstances albeit that they are not fully tested by cross-examination. I note again his ability to finance expensive Supreme Court litigation and his continued operation of the business which, after all, supported the family unit during the course of the marriage. Where there will be some delay before the substantive issues are finalised (despite taking carriage of the matter myself with an anticipated earlier trial), I am not persuaded that there should be any undue delay in the satisfaction of the costs order. I will order that the wife’s costs be paid within 30 days of the date of these orders.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McGuire. Associate:
Dated: 3 April 2024
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