Bergman and Bergman and Ors (No 3)
[2009] FamCA 1172
•3 DECEMBER 2009
FAMILY COURT OF AUSTRALIA
| BERGMAN & BERGMAN AND ORS (NO. 3) | [2009] FamCA 1172 |
| FAMILY LAW – COSTS – Orders sought for costs on an indemnity basis – Consideration of party and party costs and lawyer and client costs |
| Family Law Act 1985 (Cth) s 117 Giles v Randall (1915) 1KB 290 Penfold v Penfold (1980) FLC 90-800 Oshlack v Richmond River Council (1998) 152 ALR 183 Warby & Warby (2001) FLC 93-091 Fennessy & Gregorian (2009) FLC 93-399 |
| APPLICANT: | MS BERGMAN |
| RESPONDENT: | MR BERGMAN (via his appointed Case Guardian) |
| THIRD PARTY: | MR SARINSSON |
| FOURTH PARTY: | MR PORTER |
| FILE NUMBER: | MLF | 5245 | of | 2005 |
| DATE DELIVERED: | 3 DECEMBER 2009 |
| PLACE DELIVERED: | MELBOURNE |
| PLACE HEARD: | MELBOURNE |
| JUDGMENT OF: | YOUNG J |
| HEARING DATE: | 20 NOVEMBER 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MS STOIKOVSA |
| SOLICITOR FOR THE APPLICANT: | CAROLINE COUNSEL FAMILY LAWYERS |
| SOLICITOR FOR RESPONDENT: | MARSHALLS AND DENT |
| SOLICITOR FOR THIRD PARTY: | SUSAN SNYDER |
| SOLICITOR FOR FOURTH PARTY: | MR SALAMANCA |
| CAREW COUNSEL PTY LTD |
Orders
IT IS ORDERED:
THAT the Case Guardian on behalf of the husband pay to the solicitors for the Fourth Party, Mr Porter, and on his behalf, costs assessed on a lawyer and client basis for and incidental to the proceedings determined by the Court pursuant to the application in a case filed 20 April 2007 and as subsequently amended by further applications filed 11 July 2007 and 22 May 2008 together with the further costs assessed on a like basis for and incidental to the further application filed 29 September 2009 and these costs related proceedings.
THAT the application in a case filed 20 April 2007 and the amending applications filed 11 July 2007 and 22 May 2008 and the further application in a case filed 29 September 2009 be otherwise discharged.
THAT the assessment of lawyer and client costs be referred to Registrar Sikiotis or such other Registrar of the Court who has responsibility for assessment of costs for further listing and determination.
IT IS CERTIFIED
THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for each of the parties.
IT IS NOTED that publication of this judgment under the pseudonym Bergman & Bergman is approved pursuant to s121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 5245 of 2005
| MS BERGMAN |
Applicant
And
| MR BERGMAN (via his appointed Case Guardian) |
Respondent
And
| MR SARINSSON |
Third Party
And
| MR PORTER |
Fourth Party
REASONS FOR JUDGMENT
On 4 August 2008 I delivered reasons for judgment and pronounced orders in an interlocutory hearing which involved complex property, financial, business valuation and commercial disputes and which turned primarily upon the application of the husband, who appeared by his Case Guardian, to file an amended Form 1A application. The orders that he then intended to file with the Court were said to be pursuant to the accrued jurisdiction of the Court and further pursuant to ss90AE and 90AF of the Family Law Act 1975 (Cth) (“the Act”) and which required the joinder of individual and corporate respondents to the property proceedings then already issued as between husband and wife.
In my Orders I dismissed the applications of the Case Guardian filed 11 July 2007 and 22 May 2008 and made further consequential Orders. As to the question of costs of the applicant and all of the respondents, of and incidental to that interlocutory hearing, I adjourned them for listing and further hearing before me at a date when all consequential applications and appeals had been heard and determined by the Court.
I have now received written submissions and heard oral argument from Mr Salamanca, of Counsel, appearing for the fourth party Mr Porter (“Porter”) who seeks an order for costs on an indemnity basis as against the Case Guardian acting for the husband. Those Orders were opposed by Ms Stoikovska, of Counsel, briefed for the Case Guardian respondent. Ms Synder, solicitor appeared for the third party Mr Sarinsson at the commencement of these costs proceedings and asked to be excused from the proceedings as her client sought no costs orders.
The s79 proceedings as between the husband and wife have subsequently settled after extensive out of court mediation and final orders have been pronounced. The wife is therefore not involved in these continuing costs proceedings and seeks no costs orders on her behalf.
The costs hearing came before me for case management on 26 May 2009 and I made orders that day as to the filing of applications, affidavits and written submissions. It is in furtherance of the orders made that day and in determination of the orders for costs which I reserved on 4 August 2008 that this matter is now before me for hearing and judgment.
On 29 September 2009 Porter caused to be filed his application in a case wherein he sought the following costs orders:
“1.That within seven days the husband pay to the solicitors for [Mr Porter] the sum of $162,812.80 by way of indemnity costs of and incidental to the proceedings relating to the application in a case filed by the Case Guardian on behalf of the husband on 20 April 2007, subsequently amended by an application in a case filed 11 January 2007 and further amended by an application in a case filed 22 May 2008.
2.That the husband pay [Mr Porter’s] costs of and incidental to this application on an indemnity basis”.
In support of that application an affidavit was filed by the solicitor representing Porter, Ms Keleigh Robinson on 8 August 2008 and various annexures, costs agreements, bills of cost and correspondence were annexed thereto.
Written submissions were prepared and filed on behalf of Porter on 8 August 2008 and they were supplemented by further submissions filed on 25 September 2009 (Court Index Documents Nos. 269 and 293) and I have read each of those submissions and that affidavit relied upon.
The response of the Case Guardian on behalf of the husband was filed 26 October 2009 and therein it was sought that:
“1.That the application in a case filed on behalf of [Mr Porter] on 29 September 2009 be dismissed.
2.That the applicant pay the respondent’s costs of and incidental to this application”.
In support of the orders sought in that response the Case Guardian relied upon the affidavit of her instructing solicitor filed 15 September 2008 and written submissions prepared and filed on 15 September 2008 and 26 October 2009 (Court Index Documents Nos. 278 and 291).
Additionally and in the costs hearing before me reference was made to two earlier submissions prepared by Counsel on behalf of the Case Guardian and filed on 18 June 2008 and 25 June 2008 each of which I have had reference to for the purposes of evaluating the submissions and outcome.
The costs hearing before me was presented over two days, the 19th and 20th November 2009, and I received well considered submissions from Counsel for both parties, neither of whom I record have had any prior involvement in the many complex and extended interim hearings.
Whilst it is unnecessary to detail my reasons for judgment in that interlocutory hearing which gave rise to this costs application, it would be helpful for me to now succinctly overview the issues before the Court and my summarised findings insofar as they are relevant to the determination of costs orders that are both just and proper.
The Case Guardian had proposed joining Porter and others as additional parties to the s79 matrimonial dispute so that the whole of the commercial dispute, shareholder and valuation issues could be heard and determined and final orders made under the Family Law Act1975 (Cth) (“the Act”). Porter opposed both his joinder and the joinder of other potential parties and the outcome centred around the finding of whether there was a single justiciable controversy which should bring the commercial dispute within the jurisdiction of this Court and further whether ss90AE and 90AF of the Act necessarily provided a statutory basis for the relief sought by the Case Guardian.
Porter maintained at all times that he was opposed to any required involvement in proceedings in this Court. His primary submission was that there existed a commercial dispute between he and the Case Guardian representing the husband and that dispute should first be resolved in the manner prescribed in a shareholders agreement that was identified in those proceedings or otherwise pursuant to the laws of Victoria, in a State court of competent commercial jurisdiction. At all times Senior Counsel who then appeared for Porter submitted that she was instructed to appear under protest. I recorded the summary position of the Case Guardian in that earlier 4 August 2008 judgment at paragraphs 6 – 9 inclusive, and the position of Porter in paragraphs 12 – 15 (inclusive) and a further summary of the extended facts and issues sought then to be placed before the Court were summarised in the judgment in paragraphs 16 and 17 thereof.
I have re-read the background facts to that judgment which are incorporated in paragraph 20 thereof from an earlier judgment I had delivered and they were the foundation to the various factual issues then before the Court and which I now have before me on the basis of determining an appropriate costs order that is just.
There were certain findings made in that interlocutory judgment which are fundamental to the determination of the costs issue in these proceedings. I now briefly summarise those findings and the manner in which the proceedings were conducted before me, but again I emphasise that I have re-read my primary judgment and it is necessary to rely upon the whole of that judgment, and earlier extempore judgments incorporated therein, and all of the relevant findings.
As to the shareholders agreement I found that it was intended to be a valid and properly executed agreement entered into by each of the three original shareholders of W Corporation, and with full knowledge and consent. The affidavit of a commercial solicitor, Mr Rockman, was before the Court and relied upon and I expressed a very clear preference for accepting both his explanations and his evidence. I therefore rejected any issue, concern or position expressed by the Case Guardian in her affidavit before the Court.
As to the determination of a single justiciable controversy the evidence before the Court on behalf of the Case Guardian was summarised in my judgment in paragraphs 57 – 65 (inclusive) and, in the context of this costs application it was apparent that many serious and wide ranging allegations were made against Porter and the other potential parties. These are more particularly summarised in paragraphs 59 and 60 of the judgment but included:
§the forging of the husband’s signature for the purpose of obtaining payment of substantial management fees;
§improperly excluding and denying the husband access to information and management rights of the commercial development entity;
§diverting funds and assets to another property development in which Porter had an interest;
§manipulating loan accounts and payments;
§the payment of unreasonable and exorbitant management fees contrary to the commercial and financial interests of the husband.
Senior Counsel for the Case Guardian had then submitted that all of the relief then sought against the various proposed respondents was within the jurisdiction of the Court and was manifestly not frivolous and would clearly affect the rights of the named persons. I found against that submission. Further it was submitted that the commercial dispute sought to be embraced within the Court was properly incidental to the dispute between husband and wife and again I found against that submission (paragraphs 63 and 64 of the judgment).
The submissions of Porter were detailed in paragraphs 70 – 77 (inclusive) of the judgment and I have again read those submissions for the purposes of this costs dispute, supported as they were by the various submissions of the other then potential parties.
In determining the accrued jurisdiction issue as sought on behalf of the Case Guardian I found there was not a single justiciable controversy and that the submission of Senior Counsel for the Case Guardian was “a somewhat bold and very forthright submission with which I do not agree”. After examining the earlier reported decisions of Warby & Warby (2001) FLC 93-091 and Bishop & Bishop (2003) FLC 93-144 I concluded that the financial affairs of the husband and wife in the s79 proceedings are largely, if not completely, separate from those of the commercial dispute involving Porter and the other potential parties. I found that “they are therefore in no way intimately or otherwise interwoven so as to justify the finding of a single justiciable controversy … I find it would not do justice to any of the persons appearing in the interlocutory proceedings to litigate all of the commercial disputes and any other issues in the Family Court”.
I further concluded that, in the exercise of my discretion, and even if I were found to be in error in determining that there was not a single justiciable controversy, I would nevertheless decline to exercise my discretion in favour of hearing the claim under the accrued jurisdiction for all of the detailed reasons given in the judgment.
The further submissions of Senior Counsel for the Case Guardian rested upon legal argument submitted pursuant to the provisions of ss90AE and 90AF and those submissions were analysed and rejected and were not sufficiently connected to the s79 proceedings.
It is therefore with the background of that detailed interlocutory hearing and the very precise and clear findings and orders that I pronounced that I now determine what, if any, is a just and proper order for costs.
In the course of submissions Counsel for Porter identified and relied upon my further extempore judgments and orders of 8 August 2008 and 26 August 2009. I have therefore read these documents for the purposes of evaluating all of the issues now before me.
I was finally referred to one other extempore judgment which I delivered on 30 May 2008 and, as a result thereof, ordered costs in the sum of $11,835 to be paid by Porter to the solicitors for the Case Guardian and stayed that payment for a period of sixty days.
As part of the submissions in the proceedings now before me I was advised that this payment of costs remains outstanding. I was referred to the judgment on the basis that I had made a determination of the quantum of costs and had not ordered an assessment to be undertaken by the Registrar but had specifically fixed the payment sum. That of course was in a hearing of limited duration and complexity and it was an approach that I then adopted to minimise ongoing and further costs of the assessment and to do justice between the parties. I understand it was not the subject of any appeal and must hereafter be paid or enforcement proceedings are available within the Court to enforce that payment required of Porter in favour of the Case Guardian. Otherwise that outcome and my approach is of no real assistance in the more involved costs proceedings now before me.
The application of Porter of 29 September 2009 identified the quantum of costs, on an indemnity basis, said to be properly payable to him as at that date of filing. Significantly the further order in paragraph 2 sought therein was for the ongoing costs of and incidental to that application, again on an indemnity basis, and that would therefore include the various further submissions, preparation and court hearing dates.
I have no evidence now of the actual quantum by way of a fully itemised bill of costs updated to the final day of hearing though I record that I was informed by Counsel that Porter’s total costs, on an indemnity basis, would now exceed $200,000. I therefore have no basis to examine or determine what would be the costs incurred by Porter, on any of the various bases on which costs could be awarded and ultimately that could only be a matter determined on proper assessment and preparation by a Registrar. That in itself will be a long, somewhat cumbersome and costly process but there is no realistic alternative option now available to the Court. I would urge the parties to confer and agree on the actual quantum of costs that are payable as a result of the orders that I have pronounced in this judgment and it would be hoped that a good measure of common sense and balanced and appropriate legal advice is given on this issue.
Whilst the Case Guardian sought in the response filed 26 October 2009 the dismissal of the application with costs of and incidental thereto there was no argument presented before me as to any costs payment to be made to or on behalf of the Case Guardian and certainly not as to any quantum of costs. Indeed to summarise various exchanges between myself and Counsel for the Case Guardian it was clearly apparent that whilst she was briefed to formally resist the costs order sought, primarily the concern was the quantum of costs and the indemnity basis on which such costs were claimed. I was left with a clear understanding that some award of costs in favour of Porter was both expected and, from Counsel’s submissions, just and reasonable. The focus of her submissions was that costs as claimed were excessive and should be paid on the usual party and party basis and not on any extended and more generous lawyer and client or indemnity basis.
Within the above framework of issues and submissions which I have now recorded I proceeded to consider and evaluate the submissions and legal issues and to exercise my independent discretion as to whether:
(a)it is just that a costs order be pronounced; and
(b)should such order for costs should be on the basis of party and party, lawyer and client or an indemnity basis.
Section 117 of the Act provides:
“1.Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
2.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), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) 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.
As the husband is conducting his case with the appointment of his daughter as Case Guardian it is proper that I identify Family Law Rule 6.13 which provides for the conduct of a case by a Case Guardian and in the first notation to that Rule the Court is empowered to order a Case Guardian to pay costs. It is curious why that provision is incorporated within the notation and is not provided for as part of the Rule, as Rule 1.17(1) provides that notes are for explanatory purposes only. My understanding of and approach to that notation is that, in appropriate circumstances where, on the facts of the particular case, it was found to be that a costs order that was just, an order personally could be made for costs against a Case Guardian. That may arise in circumstances where the actual person appointed as a Case Guardian has conducted the case both inappropriately and beyond any proper instructions. In this case and from what I have heard and been informed of throughout the proceedings when I raised on many occasions why a Case Guardian was appointed when the husband was elsewhere conducting litigation I was always left with the clear understanding that the husband could and did give instructions to his daughter as his appointed Case Guardian. I therefore proceeded on the basis that any costs order is now made as against the Case Guardian in her official capacity as acting for and on behalf of the husband and it is the husband who has the primary responsibility for the payment of the sum required to satisfy the assessment of costs ordered in these proceedings.
That Rule (6.13) provides:
Conduct of case by Case Guardian
(1) A person appointed as the case guardian of a party:
(a)is bound by these Rules;
(b)must do anything required by these Rules to be done by the party;
(c)may, for the benefit of the party, do anything permitted by these Rules to be done by the party; and
(d)if seeking a consent order (other than an order relating to practice or procedure), must file an affidavit setting out the facts relied on to satisfy the court that the order is in the party’s best interests.
(2)The duty of disclosure applies to a case guardian for a child and a person with a disability.
Note 1 The court may order a case guardian to pay costs.
As to the approach of the Court to and the pronouncement of an award of costs there are many reported authorities that have considered s.117 of the Act. In Penfold v Penfold (1980) FLC 90-800 the High Court (Stephen, Mason, Aicken and Wilson JJ) said at 75,053:
“It is an accurate description of s 117 (1) to say that it expresses a general rule, provided that it is firmly understood that the section is not paramount to s 117 (2). Subsection (1) is expressed to be subject to ss (2), the former must yield whenever a Judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the inter-relationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs.”
The Court can make an order for costs on the basis of one factor in s. 117(2A) alone. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) (2005) 33 Fam LR 123 the Full Court (Kay, Warnick and Boland JJ) said at 130:
“Nowhere in subsection 2(A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection 2(A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”
By s117 the Court is required to commence from the position that both parties are to be responsible for the payment of their legal costs and disbursements. I have then considered and determined if there are circumstances that would justly require the departure from that general principle and in so doing I have evaluated the submissions upon each of the relevant s117(2A) factors.
I am largely unaware of the financial circumstances of the husband or of Porter. From my substantial involvement in the past proceedings I do have some evidence and statements filed and referenced to, in summary, the comfortable financial circumstances of the husband. I have far less knowledge of Porter’s financial circumstances, save for his involvement in the overseas development and the various allegations made against his financial management and dealings by the husband.
Nevertheless I am comfortable that each of the applicant and the respondent to this hearing are involved in significant commercial and property developments represented by their various court actions in this and other courts both within Victoria and overseas. The submissions of Mr Salamanca were, in part, to the effect that his client was not a party to the matrimonial proceedings and was before the Court primarily for the purpose of ensuring that any hearing of his complex commercial valuation and other disputes with the husband remained outside of this Court. I am comfortable with the fact that I am required only to consider the various factors within sub-paragraph 2A of s.117 thereof and nowhere must I be satisfied that more than any one factor be present before making a determination as to what is just as to an order for costs. I do not intend to further investigate the financial circumstances of either the applicant or respondent to this costs application, subject to other factors being present to properly satisfy the exercise that I must undertake.
Clearly legal aid is not available to the applicant and respondent and bears no relevance in this assessment.
Likewise I have no regard to the requirements of sub-paragraphs (d) and (f) thereof and neither matter was pursued in legal argument. There was evidence before the Court as to the alleged failure of the husband to discuss or negotiate issues and I have read and evaluated the affidavit of Ms Robinson. I am however not satisfied that any offer in writing was made and certainly there were no details of any such offer and I specifically make no determination as to the appropriateness of an order for costs pursuant to sub-paragraph (f) thereof. Otherwise I am not further persuaded by the contents and many annexures of that supporting affidavit and I do not consider it necessary to rely upon this sub-paragraph to reach the outcome which I will order.
The husband, through his Case Guardian, was wholly unsuccessful in the interlocutory proceedings and that is a matter of very substantial weight in determining the justice of pronouncing an order for costs and I have given substantial importance to sub-paragraph (e) thereof.
The conduct of the proceedings before me and the additional allegations and claims of the husband as were identified in paragraphs 59 and 60 of my judgment are likewise matters of real importance both as to the justice of an order for costs and hereafter as to the basis of the actual award of costs. I therefore have given substantial weight to sub-paragraph (c) and the conduct, presentation and preparation of the husband’s case and the way in which the proceedings were somewhat prolonged with legal argument and submissions that ultimately were wholly unsuccessful. I carefully identified in my 4 August 2008 judgment all of the material that I was asked to read and consider and the additional affidavits and submissions filed with the Court. That hearing was of an interlocutory nature and thus was determined on the papers but it is a fact that the further material, facts and allegations placed before the Court did extend the issues and complexity of the hearing and therefore increased legal costs and disbursements.
As to sub-paragraph (g) there were significant other matters addressed by Mr Salamanca in his submissions for Porter and these, in part, go to justify the order for costs but are otherwise more particularly to be considered as to the basis of the costs order and I have, in more detail hereafter, identified and evaluated those further factors within that quantification and assessment task.
I am wholly satisfied that it is just for an order for costs to be made in favour of Porter for all of the proceedings of and incidental to what I identified in my earlier judgment as “the joinder proceedings” and these continuing costs applications. I conclude that it would be unjust to allow a situation where Porter was left to pay his own costs and disbursements. I record that the Full Court has otherwise dealt with the issue of costs on appeal and has made an order in that regard and I have been invited to have no regard to any of that process or costs incurred therein.
In that context I again identified the approach and submission of Counsel for the husband who in answer to a question from me, largely conceded the justice of an order for costs and concentrated her considerable efforts upon the proper and ordinary basis of assessment and quantum of those costs, being the issues to which I now turn.
INDEMNITY COSTS
An order for the payment of costs on an indemnity basis is exceptional in this court: see Kohan and Kohan (1993) FLC 92-340, Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
In Kohan (supra), the Full Court (Strauss, Lindenmayer and Bulley JJ) said at 79,611 (emphasis added):
“…We are of the opinion that in an appropriate case, the Court has a discretion to order costs on an indemnity basis and that such costs may be ordered, where they have been incurred under a costs agreement which departs from the usual scale of costs. However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure form the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.”
The circumstances in which an order for indemnity costs can be made are not closed. In Yunghanns v Yunghanns (2000) FLC 93-029 the Full Court in the joint judgment of Lindenmayer and Holden JJ said at 87,471:
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Shepherd J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233.”
The decision of Shepherd J in Colgate-Palmolive (supra) is often cited to give examples of circumstances in which an order for indemnity costs is warranted. The circumstances are:
(a)the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;
(b)evidence of particular misconduct that causes loss of time to the court and the other parties;
(c)the fact that the proceedings were commenced for some ulterior motive;
(d)the fact that the proceedings were commenced in wilful disregard of known facts or clearly established law;
(e)the making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions;
(f)an imprudent refusal of an offer to compromise;
(g)an award of costs on an indemnity basis against a contemnor.
I therefore clearly record that I approached the assessment of payment of costs on the basis that the usual and appropriate order is for party and party costs and an exercise of discretion which departs from that usual scale of costs is a very significant departure and it is in that context that Counsel devoted considerable time in refining their legal submissions.
Mr Salamanca urged the award of indemnity costs in favour of his client and, as I summarise his submissions, he relied upon:
(a)the overwhelming failure of the Case Guardian’s case;
(b)that the litigation as prepared and presented to the Court on the interlocutory hearing for the Case Guardian was complex and oppressive;
(c)the orders sought and the form of the legal argument was misconceived from the outset, was bold and adventurous and had no chance of success;
(d)the husband had previously rejected or failed to follow the shareholders agreement process that should have been applicable to the determination process of any conflict or disagreement between the parties to that agreement;
(e)the husband had commenced or was defending (personally) litigation in other courts within Victoria and overseas and the intent or decision to merge all proceedings in the Family Court was seriously flawed, improper and amounted to an abuse of process;
(f)the husband, or his Case Guardian had rejected all endeavours to engage an alternate dispute resolution process;
(g)certain of the extended allegations of the husband, as presented to the Court and identified in paragraphs 59 and 60 of the judgment involved allegations of fraud and improper practice and conduct by Porter that was wholly unsupported by the evidence and should not have been part of the proceedings;
(h)that the case presented on behalf of the husband was opportunistic and that he had displayed an ulterior purpose in his orders sought in the interlocutory proceedings;
(i)that it was questionable whether the court had the power to grant 80% of the relief sought by the husband.
As to the above submissions some I accept and find to be persuasive but others are somewhat tentative and not acceptable. I accept the submission of Counsel which is identified in paragraph 56(g) of this Judgment. The failure of the argument submitted by the Case Guardian on behalf of the husband to persuade me and the outcome of the joinder case is conclusive. The litigation was complex and certainly time consuming and strenuous, but not wholly oppressive. I did, in my judgment describe the argument of Senior Counsel as bold and adventurous. The husband’s rejection of the shareholders agreement process was, I find, a matter of real significance and should have been acted upon. The husband displayed what could be seen as an ulterior purpose in seeking to use this Court to hear all of the commercial disputes and otherwise I only partly accept the submission that all efforts to engage in alternate dispute resolution were rejected, or otherwise were rejected without reasonable explanation.
Porter entered into a costs agreement and subject to the many disputes and issues that were sought to be highlighted it nevertheless is abundantly evident that the legal costs, fees and disbursements charged to Porter will exceed those that would be imposed on a Family Law Scale of Costs and Disbursements. The structure and content of that costs agreement was not specifically argued before me, though the written legal submissions addressed various issues.
Mr Salamanca’s further argument was to incorporate within sub-paragraph (g) of s.117(2A) the common law principle of costs being paid to a successful party. The Court was referred to the decision in Oshlack v Richmond River Council (1998) 152 ALR 183 where the High Court endorsed the general rule of costs which is that they should follow the outcome of the event. In that case there was discussion on whether a rule existed that a successful party should, in the absence of disentitling conduct, obtain his or her costs from the unsuccessful party. Whilst Mr Salamanca pursued his submission of the importance of the common law approach to costs, and indemnity costs, my approach is strictly to exercise my cost discretion in accordance with s.117 of the Act and the accompanying Family Law Rules, an approach which was supported by Ms Stoikovska. To this end I somewhat disencouraged Mr Salamanca from pursuing his submissions on common law principles and their incorporation within sub-paragraph (g) of s.117 of the Act.
On behalf of the Case Guardian for the husband (both of whom were in Court throughout these proceedings) Ms Stoikovska rejected any allegation of fraud or inappropriate submissions or ulterior motive and identified that her client was following senior legal advice to consolidate various court disputes and commercial actions under the umbrella of the Family Court in its accrued and further jurisdiction. Her submissions were to the effect that the husband had a legal entitlement to pursue his argument for this Court to hear and determine the whole of the commercial dispute in order to properly identify the asset pool as between husband and wife and as such it was not mischievous or inappropriate litigation. I did in my judgment (paragraph 64) find against that submission and rejected the argument that the commercial dispute was properly incidental to issues as between the husband and wife, nevertheless that was an issue which was argued and required determination. Likewise in respect of the shareholders agreement and the available process thereunder her submissions, and those of Senior Counsel throughout the hearing, was that was a matter both of legal dispute and factual argument between the various signatories thereto.
In her further submissions Ms Stoikovska submitted that because legal argument took an extended period of time and because the judgment canvassed some 61 pages of reasons that does not elevate the dispute to a costs assessment upon an indemnity basis. I agree and it is not merely the time taken to hear the application that is of importance and upon which I have relied in determining the basis of costs payable. Ms Stoikovska further submitted that there was no actual finding of fraud and those issues, including malpractice or deceptive conduct, remain issues that are alive in continuing proceedings in another Court(s). In her further submissions Counsel for the husband rejected any evidence or suggestion of forum shopping on behalf of her client but that is somewhat difficult to maintain against the background of the various litigation of which the Court was aware.
A further submission of Ms Stoikovska was that the concept of accrued jurisdiction, and the legal issues arising therefrom was still a relatively new and developing legal issue where legal practitioners are exploring the boundaries and that this case, and the arguments before me in the joinder proceedings were novel but appropriate and that there should be no criticism levelled at the Case Guardian and legal Counsel. Generally I accept the principle upon which that submission is based but I do not depart from my detailed reasons and judgment given previously.
Another submission was that the issues identified by the Case Guardian and presented to the Court were matters outside the scope and provisions of the shareholders agreement. As I have already found in paragraph 57 hereof the husband should have followed the process therein provided. It was further submitted that Senior Counsel for the Case Guardian could not otherwise have more appropriately limited or refined argument and the fact of exploring all such issues before the Court should not be a basis for an award of indemnity costs, or costs other than on a party / party basis. Generally I agree and I would not award costs on any extended basis simply because of Counsel arguing legal issues that were in all the circumstances of the case, reasonable and available. I found and repeat that some of the submissions were bold and adventurous.
It is a fact that the approach of the wife to the joinder of other parties varied from the commencement of those joinder proceedings to her final submissions. That fact is incorporated within my judgment but it is not a matter which influenced me on the costs issues.
There are facts, as I have found in this case which do, in part, meet the circumstances identified in the Colgate Palmolive (supra) decision but I balance that finding against the whole of the preparation and presentation of argument, as detailed as it may have been, on behalf of the Case Guardian. There were legal issues to be determined and it is a significant progression which I do not accept to conclude a very high level of inappropriate legal and Court conduct against the Case Guardian for the husband.
On balance and evaluating all of the evidence and submissions of Porter I conclude that there are not circumstances of such an exceptional kind as to justify the awarding of indemnity costs. Likewise all of the conduct of and of the Case Guardian on behalf of the husband is not so extraordinary as to justify the making of an order for indemnity costs.
What is just and proper in this case requires an order for costs to be assessed on a basis greater than party and party costs but, in all of the circumstances, I have determined that it would be inappropriate to pronounce an award of costs assessed upon that indemnity basis. A just outcome, proper in all of the circumstances of the proceedings now in issue before me would be for costs to be assessed and paid on a basis greater than party / party costs but not at that higher level of indemnity costs.
I therefore have considered and evaluated, and I raised in the hearing with Counsel, the appropriateness of an order for costs on the basis of lawyer and client determination.
As the Full Court (Coleman, Boland and Thackeray JJ) observed in Fennessy & Gregorian (2009) FLC 93-399 at para 64:
“64.As is generally known, parties to litigation frequently, and reasonably, incur costs in excess of those which would be covered by an award of party and party costs. The evidence suggests that has been the case in this appeal. In the circumstances it would be regrettable if the mother’s legal advisors were to be limited to party and party costs. Rather than awarding party and party costs the court may order that a party is entitled to costs as assessed on a lawyer and client basis (Rule 19.18(1)(b)).”
In this reported case the litigant behaved in a flagrant and very assertive manner, in effect refusing to follow the Courts’ direction and authority and in all of the circumstances of that case it was determined that they were not appropriate to found an order for costs on an indemnity basis. In paragraph 62 thereof the Full Court found that:
“Whilst contributing to the dismissal of his appeal, and justifying the making of an order for costs, we do not consider the father’s conduct of the proceedings in this Court to be “special or unusual” or of such an “exceptional” kind as to justify the awarding of indemnity costs. Nor in our view does the father’s conduct constitute “extraordinary conduct” sufficient to justify the making of an order for indemnity costs”.
The Family Law Rules, Rule 19.18 identify the method of calculation of costs and that Rule provides:
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.
Example
For paragraph (1) (c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.
(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.
As is apparent from this Rule an assessment may be made on a lawyer and client basis. The obligation upon the Court, if it is to depart from costs assessed on a party / party basis is to specify the method of calculation and in that regard I turn to consider each of the relevant issues identified in sub-paragraph (3) thereof.
The importance, complexity and difficulty of the issues in this case does warrant an assessment of costs on a more substantial basis than party / party costs. The legal practitioners engaged by Porter have had to prepare and respond to many and varied facts and allegations and that has necessitated substantial preparation and legal argument. There has been much time spent on the case and that properly needs to be reflected in the basis of the costs awarded. Each of these issues, without regard to the scale of charges ordinarily payable to lawyers in comparable cases strongly justify a departure from party / party costs. The case presented on behalf of the husband was wholly unsuccessful.
The Family Law Rules do not define what is meant by an assessment of costs on a lawyer and client basis. There is no formal definition or identification of the basis of costs in Rule 19.18(1)(b) and therefore it is for the reasonable and informed exercise of discretion having regard to the items for consideration identified in sub-paragraph (3) thereof.
It is inherent in the language of the Rule, and part of the common law that lawyer and client costs are likely to be of a greater scope for the allowance of costs than party and party costs; see Giles v Randall (1915) 1KB 290 at 295 and Frankenburg v Famous Lasky Film Service Ltd (1931) 1 Ch 428 at 436) where it was said that “solicitor and client costs are intended to embrace a more generous allowance for the actual costs which have been incurred …”. It would appear from reported authorities that the difference in the basis of taxation lay in the work that could be recognised in the costs allowed and not in the quantum allowable for the same work. On that approach the “more generous scale” would broaden the range of items that may be allowed on assessment. The quantum allowed for each individual item should be assessed and determined having regard to the costs agreement entered into, the actual charges levied to Porter and what is reasonable and proper, notwithstanding that they may exceed the Family Law Scale of costs and charges. That allowance of costs, fees and disbursements however would be less than the Registrar would otherwise allow on the basis of an award of full indemnity costs.
In the Law of Costs, G.E. Dal Pont, Second Edition, Lexis Nexis Butterworths, (2009) the learned author comments as follows:
“16.27Prima facie, a taxation on a solicitor and client basis allows all costs reasonably incurred and of reasonable amount; a taxation on an indemnity basis allows all costs incurred except those unreasonably incurred or unreasonably in amount …
16.28Where the difference, on these definitions, lies is that on a solicitor and client basis the taxing officer includes nothing unless satisfied that it is reasonably incurred and of a reasonable amount; on an indemnity basis everything is included unless it is driven out by the words of exclusion, namely, except so far as the item is of an unreasonable amount or have been unreasonably incurred. This distinction is essentially a matter of onus.
In summary, and by way of guidance for the parties or the Registrar I would intend to allow to Porter all of his costs and disbursements where they are reasonably incurred and of a reasonable amount as otherwise distinct from all costs incurred and allowed on an indemnity basis. Certainly, and again for clarity I intend to allow and have assessed costs on a basis more significant and generous than a party and party calculation of costs.
I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young
………………………………………………………..
Associate:
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
Legal Concepts
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Costs
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Remedies
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Procedural Fairness
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