Bilson and Martin

[2016] FamCA 493

FAMILY COURT OF AUSTRALIA

BILSON & MARTIN [2016] FamCA 493

FAMILY LAW – COSTS – indemnity costs not ordered – costs awarded on a party/party basis

APPLICANT: Ms Bilson

RESPONDENT: Mr Martin

INDEPENDENT CHILDREN’S LAWYER: Victoria Legal Aid

FILE NUMBER: MLC 4609 of 2009

DATE DELIVERED: 21 June 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 26 August 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Clinch

SOLICITOR FOR THE APPLICANT: Nicholes Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Kirkham QC

SOLICITOR FOR THE RESPONDENT: Hutchinson Legal

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: Daniel Piekarski

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Victoria Legal Aid

Orders

1.The father pay the costs of the maternal aunt of an incidental to her parenting proceedings such costs to be calculated on a party/party basis in accordance with Schedule 3 to the Family Law Rules and failing agreement to be assessed in accordance with Chapter 19 of the Rules.

2.Certify for counsel.

IT IS NOTED that publication of this judgment by this Court under the Bilson& Martin has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

Ms Bilson

Applicant

And

Mr Martin

Respondent

And

Independent Children’s Lawyer

REASONS FOR JUDGMENT

Introduction

1. These finalised parenting proceedings concern children whose mother died in 2011. The applicant is the children’s maternal aunt who resides in the United Kingdom. The respondent is the children’s father who, in 2013, was convicted of a serious crime and sentenced to a long term of imprisonment with a lengthy non-parole period.

2. The applicant’s substantive application, filed 18 July 2011, was to assume care and responsibility for the children, be able to change the children’s family name and have them reside with her in the United Kingdom. The respondent filed a response on 15 August 2011 seeking that the children live with him and not be taken out of Australia. Following the dismissal of the father’s appeal against and the prosecution’s appeal against sentence, the respondent filed an Amended Response in which he continued to seek parenting orders other than those proposed by the maternal aunt.

3. In the result, a final order was made by consent on 26 August 2015. Consequent upon finalisation of the proceedings, the applicant maternal aunt made application for the respondent to pay her costs of the proceedings on an indemnity basis and in the sum of $94,275.

4. The applicant filed costs submissions (15 pages) on 6 November 2015.

5. The respondent filed costs submissions (12 pages) on 4 December 2015

6. I have read the submissions of both parties.

The Applications

1. The applicant seeks that the respondent pay the sum of $94,275 being her costs assessed on an indemnity basis from October 2011. It is apparent from the table at pages 8 and 9 of the applicant’s submission that the costs of preparing the costs submission are not included in the sum claimed.

2. The respondent seeks that each party pay their own costs. Without derogating from the orders he seeks, as a fallback position he contends that any costs ordered should be calculated on a party/party basis and in accordance with the scale of costs provided in Schedule 3 to the Family Law Rules 2004 (“FLR”). I will refer to this a costs calculated “at scale”.

The Law

1. Costs orders are governed by s 117 of the Family Law Act 1975 (Cth) (“the Act”). That section relevantly provides as follows:

   (1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 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), (4A), 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.

Application of the Law to the Facts

1. The majority of the High Court in Penfold v Penfold (1980) 144 CLR 311 clarified that s 117(1) of the Act expresses a general rule, that each party bear their own costs, but that it is not paramount to s 117(2). Section 117(1) is expressed as subject to subsection (2). The general rule will yield in a particular case if the court is satisfied that there are circumstances justifying an order that one party pay part or all of another party’s costs.

2. In order for the applicant to succeed, the court must be satisfied that:-

   a)the principle contained in s 117(1), that each party should bear his or her own costs is displaced;

   b)it is “just” to make a costs order; and

   c)the assessment of costs on an indemnity basis is appropriate.

   The applicant for costs (the maternal aunt) bears the onus of persuading the court of each element. A positive finding in relation to (a) enlivens the court’s discretion to make a costs order. If the maternal aunt satisfies me of (a) and (b) but not (c), costs may be calculated on another basis. For instance, on a lawyer and client basis or a party/party basis or by a specified method or in accordance with Schedule 3 of the FLR

3. In the event that I order that costs be paid but calculated at scale, neither party has asked me to fix those costs. Accordingly, it is open to me to order costs in a specific amount and the matter will have to be assessed by the Registrar.

4. Rule 19.08(3) of the FLR requires that any applicant for indemnity costs must notify the court if she is bound by a costs agreement and the applicant has done so. It is also required that the court be notified of “the terms of the costs agreement”. The applicant has not provided a copy of the agreement or advised of the terms of the agreement. However, I do not consider that anything turns on that omission. As will be apparent, the aunt’s application for indemnity costs fails for other reasons.

5. It is appropriate to identify the matters which justify a costs order being made prior to, and discretely from, a consideration of the specific factors which may affect what order (if any) is to be made. The factors which inform the exercise of the discretion may be the same or similar to the factors in s 117(2A) just differently applied (see Bevan and Bevan [2013] FamCAFC 116 [89]).

6. In the present case, the facts that support a departure from the principle that each party should bear their own costs is that the father was wholly unsuccessful with his application. I am comfortably satisfied that the circumstances of this case justify the making of an order for costs.

7. This leads me to a consideration of the matters referred to in s 117(2A) for the purpose of deciding what (if any) order ought to be made. My discretion in relation to costs is wide. The court is not bound to require an applicant for costs to satisfy me that every factor applies to her case.

8. The Full Court in Brown v Brown (1998) FLC 92-822 and, in particular, the leading judgment of Kay J, held that the Court may consider just one, or more than one, of the factors under s 117(2A) when determining what (if any) order for costs ought to be made:

   In many cases there will be an outstanding feature of the case that makes an order for costs appropriate, a feature which so dominates the scene it can outweigh any of the other s117 (2A) considerations. In those cases the Court may readily infer that the trial Judge has given appropriate consideration to the aspects of s 117(2A) but in the shadow of each of the required aspects has appropriately determined that overwhelmingly the case demands an order for costs be made.

9. The decision in Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) v Fish (2005) 33 FLR 123 reiterates that nowhere in s 117(2A) is there any requirement that more than one factor under that subsection must be present for a costs order to be made and that there is nothing to prevent just one factor being the sole basis for an order for costs.

10. From the respective written submissions of the parties, the following matters emerge as matters to which I should have regard in considering what (if any) that order should be:-

    ·the financial circumstances of each party (s 117(2A)(a));

    ·whether either party has been wholly unsuccessful in the proceedings (s 117(2A)(e)).

11. Sub-section 117(2A)(g), requires me to have regard to “such other matters as the court considers relevant”. This enables a variety of matters to be addressed provided, of course, that those matters are relevant. In this case, the respondent maternal aunt raises the tragic circumstances of her sister’s death. She contends that, if the respondent husband had not acted as he had, the proceedings would not have been necessary. I agree that the circumstances are tragic but an order for costs are not a punitive measure. Costs are compensatory within the context of proceedings.

Financial Circumstances of the Parties

1. The respondent has detailed his financial circumstances at paragraphs 13 to 23 of his submissions and there has been no challenge to those matters. There is $38,582 in trust and a superannuation interest of $20,631 and he has debts. He is incarcerated so his day-to-day needs will be met. Impecuniosity or modest means are not defences against a liability for costs. If they were, impecunious litigants could pursue ridiculous claims with impunity and that is certainly not the case.

2. The maternal aunt is legally trained but not working. She has full time care of the dependent children in the United Kingdom. The father alludes to compensation payments from which the children may benefit and appears to submit that the maternal aunt will derive a benefit too. The maternal aunt says that she is in receipt of income insurance approximating one half of her income prior to the mother’s death. I am not satisfied that the children’s compensation (if any) will reimburse the aunt for her legal costs in this proceeding. I am comfortably satisfied that the maternal aunt cannot afford to spend money unnecessarily on legal costs.

3. I am satisfied that the respective financial situations of the parties support an order being made which will relieve a party who has incurred costs unnecessarily from having to meet the burden of those costs or all of those costs. The maternal aunt is such a party.

Conduct of the Parties in relation to the Proceedings

1. The father submits that he conducted the proceedings in a child focussed and reasonable manner. This factor is principally concerned with productions of documents and compliance procedural orders. However, the outcome of these proceedings indicate that the father could not have been particularly child focussed or reasonable.

2. I do not accept the submissions made by the maternal aunt to the effect that I should have regard to the emotional anguish of the children or that the father has been obdurate in relation to payment out to her or for the children of benefits from the late mother’s superannuation. It is only the father’s behaviour as a litigant that is relevant in relation to costs and, particularly, an award of indemnity costs. As the section makes clear, the conduct which is relevant is “in relation to the proceedings” and not generally.

Whether a Party Has Been Wholly Unsuccessful in the Proceedings

1. The maternal aunt submits, correctly in my assessment, that the father was wholly unsuccessful in the proceedings. The father contends that, because ultimately he consented to orders, he was not unsuccessful. That contention is misconceived. It might have been different if he had consented immediately when the aunt’s proceedings were issued but consenting when he did was too little too late. His consent did obviate the need for the aunt to incur further costs but her application relates to costs for legal services already performed and the corresponding liability that she incurred and must meet.

Conclusion on Liability for Costs

1. I consider that it is just within the meaning of s 117(2), that the father pay the costs of the maternal aunt of and incidental to the proceedings.

Indemnity Costs and Other Relevant Matters

1. When considering an application for costs to be assessed on an indemnity basis, I am guided by principles emanating from the following relevant authorities, which were conveniently summarised in Muldoon & Carlyle (2012) FLC 93-513, where the Full Court said;

   [115].It is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated that there are exceptional circumstances, such that the usual order for party-party costs should be departed from (Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; Kohan and Kohan (1993) FLC ¶92-340; Munday v Bowman (1997) FLC ¶92-784; Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC ¶93-029; Limousin & Limousin (Costs) (2007) 38 Fam LR 478; Fennessy & Gregorian (2009) FLC ¶93-399; D & D (Costs) (No 2) (2010) FLC ¶93-435, Stephens v Stephens and Anor (2010) 44 Fam LR 117). As was said by the Full Court in Stephens (at [67]):

   An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages ...

   [116].In support of the application for indemnity costs, counsel pointed only to the fact that it was always apparent there was no merit in the appeal. This is in our view not an exceptional circumstance as would justify an order for indemnity costs. 

2. Similar sentiments were echoed by the Full Court when it allowed an appeal against the indemnity costs order made by Cronin J in earlier proceedings between the husband and the wife in this case. That decision is reported, in anonymised form, as Prantage & Prantage (2013) FLC 93-544. There the Full Court emphasised that an indemnity costs order is an exception rather than the norm. The Full Court’s reasoning in Prantage does not preclude the possibility of an order being made on an indemnity basis, in an appropriate case.

3. In Kohan and Kohan (1993) FLC 92-340 the Full Court emphasised the need for the Court to be aware of the terms of any costs agreement in order to be able to assess the difference between party-party and indemnity costs. That requirement has now found its way into the FLR, at Rule 19.08. The maternal aunt has not provided a copy of the costs agreement which is said to be dated 14 July 2011. The table at pages 8 and 9 is not a substitute for the terms of the costs agreement.

4. The authorities set the bar at a fairly high level before indemnity costs will be ordered. However, the authorities do not prescribe that indemnity costs can never be ordered. Indeed, the FLR recognise the possibility of an order being made on an indemnity basis because of the requirements of Rule 19.08(3) and the provision of Rule 19.18(1)(b). Ultimately, it is a matter of discretion in each case.

5. In Prantage & Prantage  (2013) FLC 93-544, Thackray and Ryan JJ observed as follows:

   [100]. His Honour's statement, at [50], that Sheppard J's emphasis in Colgate-Palmolive was “on parties who must have or should have known their approach was simply imprudent” does not, in our view, accurately reflect the law as explained in Colgate-Palmolive and other cases dealing with indemnity costs.

   [101]. It is true, as the trial Judge noted, that Sheppard J included in the list of situations that might give rise to an order for indemnity costs “the imprudent refusal of an offer to compromise”. However, in our view, imprudence by a party in “their approach” is not sufficient to enliven the power to award indemnity costs.

   [102]. It is important in this context to recognise, as Lindgren J did in NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [56], that there is no rule 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”.

   [103]. Lindgren J went on to point out (original emphasis):

   Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party's conduct as litigant. But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.

6. The outstanding feature which could justify an indemnity costs order in this case is that the father’s application was, for all intents and purposes, a waste of time. However, I am not satisfied that the circumstances of this case equate to the exceptional standard required.

Senior Counsel

1. Rule 19.50 provides that I may certify that it was reasonable to engage a lawyer as counsel to attend for a party.

2. I note that the father engaged senior and junior counsel in this proceeding.

3. I note that senior counsel appeared and performed work for the maternal aunt on several occasions and without always charging the maternal aunt a fee or his usual fee. That is commendable but not, in my view, necessary. For the purpose of the assessment of costs, I do not consider that it was reasonable to engage Queen’s Counsel as counsel for the maternal aunt. This was a tragic and sad case but not a particularly difficult case as far as application of legal principle to facts is concerned. Accordingly, I will not certify for senior counsel.

Conclusion

1. I am satisfied that it is proper for the father to be liable for and pay the costs of the maternal aunt calculated on a party/party basis in accordance with the scale of costs provided for in the FLR.

2. For the above reasons, I make the order set out at the beginning of these reasons.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett

Legal Associate:

Date: 20 June 2016