Boston & Boston (No. 3)
[2013] FamCA 923
•29 November 2013
FAMILY COURT OF AUSTRALIA
| BOSTON & BOSTON (NO. 3) | [2013] FamCA 923 |
| FAMILY LAW – COSTS – determination of the costs arising out of an Application in a Case and a Response to an Application in a Case – whether the circumstances justify the making of an order for costs – consideration of s 117(2A) factors – consideration of whether an order for indemnity costs is appropriate – orders that the wife pay the husband’s costs of the Application in a Case on a party and party basis. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 19.08; 19.18; 19.19; 19.34 |
| Penfold v Penfold [1980] FLC 90-800 Browne & Green [2002] FLC 93-115 Fitzgerald (as child representative for A (Legal Aid Commission (Tas))) v Fish (2005) 33 Fam LR 123 |
| APPLICANT: | Mr Boston |
| RESPONDENT: | Ms Boston |
| FILE NUMBER: | ADC | 1946 | of | 2012 |
| DATE DELIVERED: | 29 November 2013 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Dawe J |
| HEARING DATE: | 17 October 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Hurley |
| SOLICITOR FOR THE APPLICANT: | Kelly & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Eid |
| SOLICITOR FOR THE RESPONDENT: | Stevanja & Associates |
Orders
The wife pay the husband’s costs of the Application in a Case filed on 8 May 2013 as incurred between 8 May 2013 and 31 May 2013 on a party and party basis.
For the purpose of order (1) hereof the costs be determined by agreement between the parties within twenty-one (21) days or failing agreement, as assessed by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004 (Cth).
The question of the costs of both parties incurred before 8 May 2013 and after 31 May 2013 is reserved to the final hearing of these proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Boston & Boston (No. 2) 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 ADELAIDE |
FILE NUMBER: ADC 1946 of 2012
| Mr Boston |
Applicant
And
| Ms Boston |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by Mr Boston (“the husband”) for a costs order against Ms Boston (“the wife”) arising out of the proceedings initiated by an Application in a Case filed by the husband on 8 May 2013 and the wife’s Response filed on 29 May 2013. That application, and the wife’s response to the same, was determined by way of an ex tempore judgment delivered on 31 May 2013 ([2013] FamCA 439).
Relevant history
The husband was born in 1961 and is now 52 years of age. He lists his occupation as “Company President.” The mother was born in 1965 and is now aged 48 years of age. She lists her occupation as “Company Vice President.”
The parties married in 1987 and separated on 10 May 2012. Registrar Paxton granted a divorce order upon the application of the husband in July 2013.
There are three children of the marriage:
a)M (born in 1994 and now aged 19);
b)L (born in 1996 and now aged 17); and
c)R (born in 2002 and now aged 11) (collectively referred to hereafter as “the children”).
The overarching proceedings were commenced by the wife by way of Initiating Application filed on 24 May 2012. The proceedings concern parenting and property issues.
The parties appeared before Federal Magistrate Simpson (as he then was) on 26 October 2012. Relevant to this application for costs, his Honour ordered that “within 21 days the parties do provide mutual informal discovery of all documents that are or have been in their respective possession, custody or control.”
The matter was transferred to this Court on 30 November 2012. Federal Magistrate Simpson (as he then was) reserved to the trial Judge the issue of the husband’s costs wasted as a result of the wife appearing two hours late to the hearing.
The parties attended a Conciliation Conference on 3 December 2012. Registrar McMahon made the following orders:
1.That the parties are to make discovery on oath by 1 February 2013; and
2.The parties do agree a valuer and instruct that valuer jointly, costs to be shared (liberty to apply on the topic of costs) with letters to be exchanged regarding joint valuation within 14 days).
3.The parties do jointly instruct a valuer of all chattels, including but not limited to boat, jewellery, furniture, effects and motor vehicles within 14 days for the matter to be referred to the Registrar for appointment of a further directions hearing.
The parties appeared before Registrar Paxton on 18 December 2012, on which date the Registrar adjourned the matter to 19 February 2013 to “enable the order of Registrar McMahon made on 3 December 2012 to be made” upon noting that “valuations are to be carried out during the period of the adjournment.”
The parties appeared before Registrar Paxton on 19 February 2013. The Registrar extended the wife’s time to comply with the orders of disclosure made by Federal Magistrate Simpson (as he then was) on 26 October 2012 for a further 14 days. Registrar Paxton’s orders also note that “the husband seeks costs of obtaining compliance on an indemnity basis.”
The husband’s Application in a Case was filed on 8 May 2013. The orders sought were as follows:
Sale of Former Matrimonial Home
1.That the former matrimonial home at [I Street], [Suburb K] in the said State be placed on the market forthwith and that [N Real Estate Agents] be employed as the sole Real Estate Agent with respect to sale of the said property.
2.That the wife forthwith do all acts and things and sign all necessary documents to effect the sale of the real property and by way of consequential arrangement that should be made for the purpose of effecting the sale:
a.The listing price of the real property shall be as agreed between the parties and if there is no agreement the listing price shall be advised by a Valuer nominated by the President of the Real Estate Institute of South Australia;
b.The real property shall be listed for sale by private treaty with [N Real Estate Agents];
3.In the event that the real property has not been sold by or before a date three (3) months of listing the same with [N Real Estate Agents] then the wife shall make all such arrangements and do all such acts and sign all such documents necessary to procure a sale by public auction of the real property upon the terms following:
a.The auctioneer should be one nominated by [N Real Estate Agents];
b.The auction shall take place by four (4) months of the deadline date sale by private treaty;
c.The reserve price shall unless agreed upon by the parties be as proposed by the auctioneer.
4.In the event that the property is not sold by auction or private negotiation within fourteen (14 days) after the said auction then the wife do all acts and sign all necessary documents necessary to procure a second auction within a further five (5) weeks of that date otherwise upon the same terms and conditions applied to the first auction.
Proceeds of sale
5.Upon completion of the sale the proceeds of sale be applied as follows:
a.Firstly, to pay all costs, commissions and expenses of the sale and to pay any Council, Water Rates and maintenance levies outstanding in respect of the real property;
b.Secondly, to discharge the ANZ Home Loan and [E] Superannuation Fund Loan and any other encumbrances affecting the real property;
c.Thirdly, the balance then remaining to be deposited into an interest bearing account in the joint names of the parties pending agreement or final property settlement.
Enforcement
6.That in the event that the wife refuses or neglects to comply with the provisions of paragraph 3 herein:
a.A Registrar of the Family Court of Australia at Adelaide is hereby appointed to execute all Deeds and documents in the name of the wife and do all acts and things necessary to give validity and operation to the said Order;
b.the wife in default is ordered to pay any and all foreseeable damages to the husband caused by her default;
c.the wife in default is ordered to pay all reasonable Solicitor/Client costs incurred by the husband for the purpose of enforcing this Order and proving his damages.
Disclosure
7.That within 14 days of the date hereof the wife make, file and serve an Affidavit of discovery and upon service thereof, make available for inspection by the husband and his Solicitors all documents so discovered and not subject to the objection to produce.
Valuations
8.That all items of chattels including but not limited to all items in the former matrimonial home, the wife’s BMW, the Mercedes, the boat and all items removed previously from the matrimonial home by the wife on 17/05/2012 be valued by [O] Valuers within 14 days of the date hereof.
Undefended
9.In the event that there is no appearance by the wife or her Counsel then the matter proceed on an undefended basis.
Partial Property Settlement
10.That [B Accountants] do release monies currently held by them firstly to:
a.Discharge all arrears with respect to the children [R] and [L’s] school fees at [C School] and [D School] up until the date hereof and in advance until the end of 2013; and
b.By way of partial property settlement the balance be divided equally between the parties with the husband’s portion to be made payable to David Burrell & Co Trust Account.
[R]
11.That paragraphs 1, 2 and 3 of the Order made on 01/06/2012 be dismissed and the husband be at liberty to travel with the child [R] born …/2002 internationally for the July school holiday period from 04/07/2013 to 28/07/2013.
12.That the Order made 17/08/2012 be dismissed and the child live with each party on a week about basis from the commencement of school on Monday to the conclusion of school the following Monday.
13.For such further or other Orders as this Honourable Court deems fit.
14.Costs on an indemnity basis.
The husband also filed an affidavit in support of his application on 9 May 2013.
I made orders in terms of paragraphs 7 and 8 of the husband’s Application in a Case on 10 May 2013. The orders I made on that day were as follows:
1.Within fourteen [14] days of the date hereof the wife file and serve an Affidavit of Discovery and upon service thereof, make available for inspection by the husband and his Solicitors all documents so discovered and not subject to the objection to produce.
2.All items of chattels including but not limited to all items in the former matrimonial home, the wife’s BMW motor vehicle, Mercedes motor vehicle, the boat and all items removed previously from the matrimonial home by the wife on 17 May 2012 be valued by [O] Valuers within fourteen [14] days from today.
3.Further consideration of the other matters is adjourned to 31 May 2013 at 9.15am before the Honourable Justice Dawe.
4.If the wife seeks to rely on any further affidavit material such affidavit to be filed and served by 4.00pm on 24 May 2013.
My orders of that date also noted that “on the next occasion of any orders of the Court that remain not complied with serious consideration will be given to whether the wife is able to continue to participate in the proceedings and whether they should continue to be defended or undefended.”
The wife filed a “List of Documents” form on 20 May 2013.
The wife filed her Response to the husband’s Application in a Case on 29 May 2013. The section of the form which requires a respondent to “State the paragraph numbers of the orders sought in the Application in a Case … with which you agree” was left blank. The orders sought were:
Sale of Units in [J] Unit Trust
1.That with … Units held in the [J] Unit Trust be placed on the market forthwith.
2.That the proceeds of the sale be applied as follows:
a)Firstly to pay all costs associated with the sale;
b)Secondly, to discharge the ANZ Home Loans and [E] Superannuation Fund Loan and any other encumbrances affecting the former matrimonial home;
c)Thirdly, the balance remaining to be deposited into an interest bearing account in the joint names of the parties pending agreement or final property settlement.
Partial Property Settlement
3.That the monies currently held by [B Accountants] be released and applied as follows:
a.Firstly, to discharge all arrears with respect to the children [R] and [L’s] school fees at [C School] and [D School];
b.Secondly, to discharge all arrears with respect to the ANZ Home Loans over the former matrimonial home; and
c.Thirdly, the balance to be divided between equally between the parties by way of a partial property settlement.
4.Such further or other Orders as this Honourable Court deems fit.
The wife filed two affidavits in support of her response on 29 May 2013.
The husband filed a further affidavit with my leave at the hearing on 31 May 2013.
The husband’s application and the wife’s response were finally determined on 31 May 2013 by way of ex tempore judgment. I made the following orders upon noting that I declined to make any orders in relation to the sale of the former matrimonial home or the child R travelling overseas with the husband to European Country P:
1.[B Accountants], do release the monies currently held by them:
(a)firstly, to discharge all arrears with respect to the children [R] born on … 2002 and L born on … 1996 with respect to school fees at [C School] and [D School] up until the date hereof and cover the fees in advance to the end of 2013;
(b)secondly, that all arrears outstanding by way of debt due to the ANZ Bank secured over the former matrimonial home be discharged;
(c)the sum of FORTY THOUSAND DOLLARS []$40,000.00] be held in an interest bearing account in the joint names of the parties’ solicitors pending further order in relation to costs;
(d)the remaining balance to be paid by way of partial property settlement and to be divided equally between the parties and paid to their respective solicitors.
2.The question of both parties’ costs of the Application in a Case filed by the husband on 8 May 2013 and the Response to an Application in a Case filed by the wife on 29 May 2013 are reserved to be determined on a date to be fixed.
The husband’s former lawyers, David Burrell & Co, filed a Notice of Ceasing to Act on 4 July 2013. The husband filed a Notice of Address for Service on 4 July 2013, which listed the husband’s personal address as his address for service.
The parties appeared before Registrar Paxton on 6 August 2013. The matter was adjourned for a directions hearing on 27 August 2013.
Registrar Paxton referred the proceedings to the list of matters awaiting trial allocation on 27 August 2013 “upon noting that there are still issues in relation to disclosure as per the notations on the order of Registrar Paxton 19 February 2013.”
A further Notice of Address for Service was filed on behalf of the husband on 30 August 2013 which listed the father’s current lawyers, Kelly & Co, as the father’s address for service.
The parties appeared before me on 5 September 2013. I made the following orders:
1.Further consideration of this matter is adjourned to 9.00am on Thursday 17 October 2013 before the Honourable Justice Dawe on the question of the costs of the parties in relation to the Application in a Case filed on 8 May 2013 and the Response to that application UPON NOTING if the disclosure issue is still ongoing the Court will hear this issue at this listing.
2.Leave is given to either party to file and serve an affidavit by 4.00pm on 11 October 2013.
3.The parties are to file a one-page dot point document concerning their argument on costs by 4.00pm on 14 October 2013.
The husband filed an affidavit in accordance with my orders of 5 September 2013 on 11 October 2013.
The husband filed his written submissions on 14 October 2013.
The wife filed her written submissions on 15 October 2013.
The issue of costs was heard before me on 17 October 2013. The husband was represented by Ms Hurley. The wife was represented by Mr Eid. The husband was given leave to file an affidavit at the outset of the hearing. I reserved my judgment after hearing the submissions of both parties.
The Law
The general rule in proceedings under the Family Law Act 1975 (Cth) (“the Act”) is that each party is to bear their own costs (s 117(1) of the Act).
Subsections 117(2)–(2A) of the Act provide an exception to that general rule. Those subsections provide:
(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;
(g)such other matters as the court considers relevant.
Subsection 117(4) and (5) concern the costs of Independent Children’s Lawyers and interveners and as such are not relevant in this matter.
The question to be determined is “whether the overall circumstances justify the making of an order for costs” per Nicholson CJ, Ellis and Buckley JJ in I & I (No 2) [1993] FLC 92-625 at 82,277 (recently cited with approval by Thackray and Ryan JJ in Prantage & Prantage [2013] FamCAFC 105 at [112]).
There is nothing in the text of s 117(2A) that prevents “any factor being the sole foundation for costs” (Kay, Warnick and Bolland JJ in Fitzgerald (as child representative for A (Legal Aid Commission (Tas))) v Fish (2005) 33 Fam LR 123 at 130).
Rule 19.18 of the Family Law Rules 2004 (Cth) provides the different bases upon which I may make an order for costs:
19.18 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a)of a specified 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.
Rule 19.34 provides the assessment principles that are applicable if an order for costs is made that requires a Registrar of this Court to conduct an assessment hearing to determine the quantum of a costs order on a given basis. That rule provides:
19.34 Assessment principles
(1)A Registrar must now allow costs that, in the opinion of the Registrar:
(a)are not reasonable 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 the 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 reasonable required to be done for the case; or
(c)unusual expenses.
Consideration of the s 117(2) factors
The husband seeks a costs order in the sum of $45,664.88 against the wife as a result of her “continued non-performance of orders over the preceding 14 months.”
The parties’ written and oral submissions concerning the husband’s applications for costs centred on the factors contained in s 117(2A).
Section 117(2A)
(a) – Financial circumstances of the parties
It is well established law that “a disparity in financial resources between the parties may justify an order for costs in favour of the party with fewer resources” (May and Ainslie-Wallace JJ in Hitch & Hitch [2012] FamCAFC 124 (10 August 2012) at [56] citing Marinko v Marinko (1983) FLC 91-307 and Mallet v Mallet (1984) 156 CLR 605).
However, as Murphy J noted in his judgment in Donaghey & Donaghey (costs) (2012) 47 Fam LR 306 at 312 that “modest, or even poor, financial circumstances, is not determinative of the issue.” If that were the case, “a party would always be able to plead impecuniosity as a means of avoiding a costs order” (Bryant CJ, Coleman and Murphy JJ in Lenova & Lenova (Costs) [2011] FamCAFC 141 (30 June 2011) at [12]).
The wife argues that she has “limited means to fund legal expenses whilst the husband’s financial position appears considerably stronger than that which is deposed.”
A perusal of the wife’s most recent Financial Statement, filed 13 August 2012, paints a direr picture than that put by her written submissions. The Financial Statement speaks of a total average weekly income of $250.00 (composed of a family benefit) against total weekly personal expenditure of $4.242.00, of which approximately half is expended on mortgage repayments to the ANZ Bank. The husband was ordered to pay the wife spousal maintenance in the sum of $750.00 per week commencing 3 September 2012 by Federal Magistrate Simpson (as he then was) on 30 August 2012. Her counsel appeared to put to me that this sum, or at least a portion of it, is not being paid by the husband. I am not prepared to accept that assertion given that no evidence was proffered to support it. Regardless, it can be seen that the wife’s financial circumstances are parlous.
The husband’s argument with regard to this subsection is twofold. First, he argues that the wife faces “no issue with impecuniosity.” In short, the husband argues that the Financial Statement does not set out the proper information and that the wife’s disclosure, or lack thereof, has prevented the husband from further exploring the veracity of the claims made in the Financial Statement. Second, even if the wife was in a financially dire situation, an order for costs “should just be made” as “it is most certainly warranted” with reference judgment of Justice Strickland in Buckley & Buckley [2013] FamCAFC 150.
The joint judgment of Kay, Coleman and Warnick JJ in the Full Court of the Family Court of Australia decision of Browne & Green [2002] FLC 93-115 is instructive. The judgment notes at 89,157:
Section 97(3) of the Family Law Act requires that in proceedings under that Act the Court shall proceed without undue formality and shall endeavour to ensure that the proceedings are not protracted. An inquiry under s 117(2A) (a) where the financial circumstances of the parties may be relevant is an inquiry to enable the Court to have some concept of the relative financial positions of the parties. It is not a search for minutiae nor is it to be seen as an appropriate exercise to conduct inconsequential arguments over the value of each party’s assets.
The joint judgment continues at 89,158:
What the Court needs to ascertain is a broad overview of the financial circumstances of the parties if it does not already have that broad overview. The costs application is not the time for conducting a wholesale examination into every aspect of the parties’ financial circumstances. There may be cases, of course, in which it is critical to examine a capacity to meet a costs order but this was not such a case. It was sufficient, as we have already indicated that the Court had a broad comparison of the parties’ financial positions available to it.
As such, my engagement with the matters raised with regard to this subsection will be limited to “an inquiry to enable the Court to have some concept of the relative financial positions of the parties.”
At a broader level, there is an issue as to whether the former matrimonial home, which I am told has been foreclosed upon, will sell for such a price as to meet all of the mortgages which have been taken out against it. There is no formal valuation of the house, merely an appraisal from a real estate agent as included at Annexure A of the wife’s affidavit filed 29 May 2013. That appraisal, which I do not accept as convincing evidence, puts the house at a value of $1,500,000. Documents that were handed up at the hearing suggest that the margin between the sale price of the house and the total value of the mortgages against it is likely to be slim or non-existent. The wife argues that, given that the former matrimonial home is a large component of the matrimonial asset pool and that it very little or no equity left, any costs order may have the effect of exceeding the totality of the property pool.
I make the following findings. I find that the wife’s financial situation is, pending the resolution of these proceedings, precarious. I find that the husband’s financial situation, as represented in his Financial Statement filed 18 September 2012, is, relatively speaking, healthier.
Whether or not this disparity in financial circumstances between the parties will have the effect of disabling a costs order to be made in favour of the husband will turn on the remaining subsections in s 117(2A) of the Act.
Section 117(2A)
(b) – Whether any party is legally aided
Neither party to the proceedings is legally aided.
Section 117(2A)
(c) – Conduct of the parties
It is with this subsection that counsel directed the majority of their submissions.
In essence, the husband’s argument is that the wife’s conduct in the pre-trial phases of these proceedings, particularly that relating to discovery and the obtaining of valuations of matrimonial property, has been grossly prolonging the proceedings and in doing so has caused the husband to incur solicitor and counsel costs that are far in excess of what should have been incurred.
The husband’s affidavit filed 7 May 2013 sets out the alleged non-compliance with the wife of orders pertaining to disclosure and valuations.
The starting point is 26 October 2012. The wife did not attend at the hearing before Federal Magistrate Simpson (as he then was) on that date despite being informed by the husband’s then lawyers that the husband would be travelling from Country P to attend the hearing. His Honour ordered the parties to provide mutual informal discovery of all documents that were then or had been in their respective possession, custody or control. Federal Magistrate Simpson also ordered that certain valuations were to be filed at least fourteen days prior to the Conciliation Conference scheduled for 3 December 2012.
Two letters were sent by the husband’s then lawyers prior to the making of that order, on 27 August 2012 and 6 September 2012. Those letters requested that the wife perform the requisite disclosure and raised the issues of valuations. No reply was received.
The wife’s then lawyers, Scales and Partners, formally withdrew on 20 November 2012.
The husband’s then lawyers sent the wife a further letter on 21 November 2012 noting that the wife had not complied with valuations and disclosure orders, asking the disclosure of specific documents, and asking that the wife sign correspondence to a specified valuer to enable certain chattels to be valued. The letter also included an informal list of the husband’s documents. Once again, no reply was received.
At the Conciliation Conference before Registrar McMahon on 3 December 2012, the parties were directed to agree and jointly instruct a valuer to value the home and certain specified chattels.
On 10 December 2012, the husband’s lawyers sent a letter to the wife’s then lawyers enclosing correspondence to prospective valuers with a request that the wife sign those documents to allow such valuations to proceed.
Registrar Paxton adjourned a hearing on 18 December 2012 to allow valuations to occur. On the same day, the husband lawyers sent a letter to the wife’s then lawyers noting that there had been no disclosure or valuations obtained despite the husband’s repeated request.
On 19 February 2013, Registrar Paxton granted an extension of time for the wife to comply with the orders of 26 October 2012.
A further letter to the same effect was sent by the husband’s lawyers on 21 February 2013. Once again, no reply was received.
A further letter was sent on 6 March 2013. Once again, no reply was received.
The wife’s then lawyers formally withdrew on 20 March 2013.
The husband’s Application in a Case was filed on 8 May 2013.
The parties’ appeared before me on 10 May 2013. The orders I made on that day were as follows:
1.Within fourteen [14] days of the date hereof the wife file and serve an Affidavit of Discovery and upon service thereof, make available for inspection by the husband and his Solicitors all documents so discovered and not subject to the objection to produce.
2.All items of chattels including but not limited to all items in the former matrimonial home, the wife’s BMW motor vehicle, Mercedes motor vehicle, the boat and all items removed previously from the matrimonial home by the wife on 17 May 2012 be valued by [O] Valuers within fourteen [14] days from today.
3.Further consideration of the other matters is adjourned to 31 May 2013 at 9.15am before the Honourable Justice Dawe.
4.If the wife seeks to rely on any further affidavit material such affidavit to be filed and served by 4.00pm on 24 May 2013.
My orders of that date also noted that “on the next occasion of any orders of the Court that remain not complied with serious consideration will be given to whether the wife is able to continue to participate in the proceedings and whether they should continue to be defended or undefended.”
The husband sent a letter to the wife’s current lawyers on 14 May 2013 enclosing the proposed joint letter of instruction to O Valuers and requesting that same be signed as to allow the valuation of all items of chattels and seeking information as to their instructions as to the wife’s response to the husband’s Application in a Case. A further letter was sent to similar effect on 16 May 2013. It would appear that no reply to said correspondence was received until 30 May 2013, at which date the wife’s current lawyers wrote to the husband’s lawyers enclosing by way of service the wife’s Response to the husband’s Application and her supporting affidavit.
The wife filed a “List of Documents” form on 20 May 2013.
The wife filed her Response to the husband’s Application in a Case on 29 May 2013. The husband through his counsel claims that the list is not specific enough so as to be considered in compliance with the Rules of full and frank disclosure. He highlights items in the list such as “bundles of bills for utilities” as examples of this vagueness.
The Application was finally determined by me on 31 May 2013.
The husband’s affidavit filed on 11 October 2013 further impugns the wife’s conduct of these proceedings following the final determination of the Application in a Case. For matters considered later in this judgment, I need not traverse those claims.
Counsel for the wife also raises issues of conduct. Mr Eid contends that the husband has made no effort to mitigate his losses. He argues that the husband and his legal counsel have failed to inspect documents that have been available at the office of the wife’s legal counsel since 30 May 2013.
In response to that assertion, counsel for the husband asserts that the disclosure by the wife has been so inadequate and out-dated that no function would be served by his instructors inspecting the documents that have been made available.
Counsel for the wife further submitted that, in advance of a Conciliation Conference that had been set for 3 December 2012, the wife’s then lawyers ceased to act for her on 20 November 2012. That was shortly after the order of Federal Magistrate Simpson (as he then was) on 26 October 2012 requiring the parties to provide “mutual informal discovery of all documents that are or have been in their respective possession, custody or control.” It is claimed that, given the fact the wife had had less than two weeks to arrange a new lawyer; the husband should have sought the adjournment of the Conciliation Conference. He did not do so, and allowed himself to incur unnecessary costs as a result of his lawyers’ attendance at the Conciliation Conference.
In addition, counsel for the wife also argues that the wife has now complied with all orders and has provided an excuse for her previous non-compliance in her affidavit filed 31 May 2013. That is, the wife says that the first solicitors she instructed were unable to continue working due to health reasons. The second firm that she engaged was only able to act for a short period of time as a “conflict issue” arose. She thereafter had difficulties finding further legal representation due to her precarious financial position. In essence, she argues that she has “complied appropriately with [orders of this Court and the Federal Circuit Court] on each and every occasion to the best of her ability, given her circumstances.”
Counsel for the husband disputed the excuse claimed by the wife. Ms Hurley claims that the wife’s counsel at the 31 May 2013 admitted that the wife had no excuse for her non-compliance. She asked that I refer to transcript to confirm this, yet I note that no transcript has been provided to me.
I find that the matters raised by the parties under this subsection favour the granting of an order for costs in favour of the husband.
Section 117(2A)
(d) – Whether the proceedings were necessitated by a parties’ non-compliance with orders of this court
Counsel for the husband argued that the Application in a Case “arises out of continual non-performance with this court’s order by the wife.” The relevant considerations under this factor are largely analogous to those considered in s 117(2A) (c) when looking to the conduct of the parties.
I accept that the husband’s application was partially necessitated by the wife’s non-compliance with orders of this Court. That is, orders sought 7 and 8, which concern disclosure and valuations, were only necessary as a result of the wife’s non-compliance with previous order of this Court and the Federal Circuit Court as discussed in the above consideration of s 117(2A)(c).
Although counsel for the wife did not specifically address this subsection, it can be presumed that the arguments in response to the points raised by the husband are similar to those raised concerning s 117(2A) (c). Namely, that the wife has now complied with the orders and has provided an excuse for not doing so earlier in her affidavit of 31 May 2013. In addition, or in the alternative, she argues that she has “complied appropriately with [the orders of this Court and the Federal Circuit Court] on each and every occasion to the best of her ability, given her circumstances.”
I find that this factor favours the granting of the husband’s application for costs.
Section 117(2A)
(e) – Whether any party to the proceedings was wholly unsuccessful
I made orders in terms of paragraphs 7 and 8 of the husband’s Application in a Case on 10 May 2013. Counsel for the husband argues that I also made an order similar to that sought in paragraph 9 (in short, that the matter proceed on an undefended basis if the wife fails to appear) on that date as my orders noted that “on the next occasion if any orders of the Court remain not complied with serious consideration will be given to whether the wife is able to continue to participate in the proceedings and whether they should continue to be defended or undefended.”
I declined to make any orders concerning the sale of the former matrimonial home or the child R travelling overseas with the husband to Country P. As such, paragraphs 1, 2, 3, 4, 5, 6, 11 and 12 of the Husband’s Application in a Case were unsuccessful.
Paragraph 13 of the husband’s application is irrelevant as it merely seeks “such further or other orders as this Honourable Court deems fit.” Paragraph 14 seeks costs on an indemnity basis. That issue will be dealt with in this judgment.
I made orders similar in nature to those sought in paragraph 10 of the husband’s Application in a Case on 31 May 2013.
I made orders very similar to the terms of paragraph 3 of the wife’s Response on 31 May 2013. I did not make any other orders that were sought by the wife.
The wife argues that the husband was largely unsuccessful in his Application in a Case. The husband argues that it does not matter whether the wife was successful or not because the wife has never utilised the order that I made on 31 May 2013.
I do not consider this factor to be determinative of the matter at hand. Both parties received some of the orders that they sought and failed to receive some of the orders that they sought. This factor does not militate in favour of or against any order for costs. I refer to and rely upon the joint judgment of Stephen, Mason, Aickin and Wilson JJ of the High Court of Australia in Penfold v Penfold [1980] FLC 90-800 at 75,054 as authority for the proposition that an order for costs under s 117(2) can be made despite the fact that the party seeking costs did not obtain every single order that they were asking for during the proceedings for which they are now seeking costs.
Section 117(2A)
(f) – Offers of settlement
I received no submissions as to any offers of settlement that may have been made by either party.
Section 117(2A)
(g) – Other relevant matters
This subsection enables the Court to have “regard to such other matters as the Court considers relevant” and is not “limited by the particulars matters set out” elsewhere in s 117(2A) of the Act (Lindenmayer J in Telfer & Telfer [1996] FLC 92-688 at 83,139). I do not consider that there are any other relevant factors to the determination of the matter at hand.
Conclusion on s 117(2)–(2A) of the Act
The order that ignited this application for costs read as follows:
The question of both parties’ costs of the Application in a Case filed by the husband on 8 May 2013and the Response to an Application in a Case filed by the wife on 29 May 2013 are reserved on a date to be fixed.
The husband, through his counsel, has sought to maximise the period of time that such an order for costs would cover. His written submissions state that he seeks “$45,664.88 costs as against the wife for her continued non-performance of orders over the preceding 14 months,” that period being from the making of the order for discovery and valuations by Federal Magistrate Simpson (as he then was) in August 2012 through to the hearing of the costs application itself in October 2013. He argues that “the wife has still not complied with the orders for discovery and the orders for valuations” and that as such “the costs sought goes beyond simply the costs on the Application in a Case and backdates for his total costs since August 2012.” His affidavit filed on 11 October 2013 goes into allegations of further non-compliance by the wife in the wake of the orders I made on 31 May 2013.
I am prepared to make an order for costs on the basis of my findings in relation to s 117(2A) (c) and (d) as outlined earlier in this judgment. However, I am not prepared to make an order covering the period from August 2012 through to October 2013 as requested by the husband.
Firstly, I find it is likely that costs have been incurred by the husband in that time frame had little to do with the Application in a Case, being the issues on which the application for costs has succeeded, that being the wife’s non-compliance with the orders concerning discovery and valuations. The husband could not argue that the maligned conduct of the wife in relation to those discreet issues has placed any additional burden upon him in regards to, for example, the aspects of this litigation that relate to parenting orders (see the joint judgment of Evatt CJ and Gibson J in Greedy & Greedy [1982] FLC 91-250 at 77,382–77,383 and the decisions referred to therein including Tuck & Tuck [1981] FLC 91-021; Rouse & Rouse [1981] FLC 91-073 and Kelly & Kelly (No 2) [1981] FLC 91-108). That nexus, if it exists, has not been established at this point in the proceedings.
I am also aware of the issue raised by the wife that such a wide ranging order for costs may result in an order for costs that exceeds the totality of the matrimonial property pool, given the extent to which one of the most significant assets of the parties, the former matrimonial home, is encumbered by mortgages.
The order will therefore be that the wife is to pay the costs of the husband as incurred between the filing of the Application in a Case on 8 May 2013 and the final determination of the same on 31 May 2013. The costs incurred by the husband before and after these dates are reserved to the trial date. At that stage, the conflicting evidence of the parties will be tested, findings will be made, and the judicial officer will be better placed to accurately assess the appropriateness of any costs order for those periods.
Consideration of the how the costs order is to be quantified
Counsel for the husband confirmed at the hearing that her client was seeking costs on an indemnity basis.
Before engaging with the issue of whether indemnity costs should be awarded, I will first consider whether indemnity costs can be awarded with reference to r 19.08 of the Family Law Rules 2004 (Cth). Rule 19.08(3) requires 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. The rule reflects the comments in the joint judgment of Strauss, Lindenmayer and Bulley JJ in Kohan & Kohan [1993] FLC 92-340 at 79,611:
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 from the normal standard, but also that the Judge should now know 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 s 117(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 making of an order for costs as determined on an indemnity basis without having reference to the terms of the applicant’s costs agreement is an appealable error (see generally the joint judgment of Bryant CJ and Warnick JJ in LGM & CAM (Contempt) (No 2) [2008] FLC 93-355 at 82,318–82,320, Finn J concurring at 82,328).
To similar effect, Holden CJ noted in Munday & Bowman [1997] FLC 92-784 at 84,661 that the inability to ascertain “the full extent to which the [costs] agreement exceeds the parameters set by the scale” would of itself “seem to preclude any exercise of the relevant discretion” to award indemnity costs in favour of the applicant.
I was presented with a copy of the husband’s costs agreements with his former and current solicitors at the hearing. As such, r 19.08(3) having been complied with, I can proceed to consider whether indemnity costs should be awarded in the matter at hand.
The Explanatory Guide to the Rules provides a definition of “indemnity basis” as “an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.”
That definition is to be contrasted with the definition for “party and party costs,” which are defined as “the costs payable by one party to another party under these Rules or by order.” Rule 19.19 of the Rules prescribes the maximum amount of party and party costs recoverable by a party as an amount calculated in accordance with Schedules 3 and 4 of the Rules.
The availability of costs orders quantified on an indemnity basis was recently considered by Thackray, Ryan and Murphy JJ sitting as the Full Court of the Family Court of Australia in Prantage & Prantage [2013] FamCAFC 105(17 June 2013).
The Full Court in Prantage & Prantage (Supra) affirmed the earlier Full Court decision of Kohan & Kohan (Supra). In Kohan & Kohan (Supra) Strauss, Lindenmayer and Bulley JJ held that, although the Court does have the power to make an order for indemnity costs, such an order would be “a very great departure from the normal standard” (at 79,611). The Court went on to note that “the circumstances justifying the departure should be of an exceptional kind” (at 79,614).
As noted by Holden CJ in Munday & Bowman [1997] FLC 92-784 at 84,660, the joint judgment in Kohan & Kohan (Supra) does not “give any indication of what might be regarded as exceptional circumstances” that would justify an order for indemnity costs as opposed to costs made on a party and party basis.
It is, however, certain that “the conduct of the party that is relevant to the issue of indemnity costs is the party’s conduct as a litigant” (Lindgren J in NMFM Property Ltd v Citibank Ltd (No 11) (2001) 187 ALR 654 at 668.
The joint judgment of Lindenmayer and Holden JJ in Yunghanns & Yunghanns [2000] FLC 93-029 at 87,471 confirmed that “the categories of circumstances which enliven the discretion to award indemnity costs are not closed” before noting, relying on the judgment of Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233, that “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.’”
Elsewhere in his Honour’s judgment in Munday & Bowman (Supra) Holden CJ goes on to further discuss the judgment of Shepherd J in the Colgate-Palmolive Company v Cussons Pty Ltd (Supra) decision:
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 false 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 I have already noted, the availability of indemnity costs is not limited to specified circumstances. In the words of Lindgren J in NMFM Property Ltd v Citibank Ltd (No 11) (2001) 187 ALR 654 at 668:
Moreover, it is important not to treat descriptions in past cases of circumstances in which a court has found it proper to make an order for payment of indemnity costs as if they were the language of a statute or as if they mandated the making of an order in any future case to which the same description may be literally applicable.
However, the comments above are indicative of the level of misconduct that calls for indemnity costs.
Finally, I note that costs orders, including those made on an indemnity basis, are not to be used as punitive measures (per Mason CJ in Latoudis v Casey (1990) 170 CLR 534 at 543 and see generally the decision of Tamberlin J in Patrick v Capital Finance Corporation (Australasia) Pty Ltd (2004) 211 ALR 272 as referred to the Court by counsel for the husband). However, “conduct that might otherwise give rise to a punishment can be … directly relevant to a consideration of indemnity costs” (per Murphy J in Donaghey & Donaghey (costs) (2012) 47 Fam LR 306 at 316).
Counsel for the husband commenced her submissions on the aptness of indemnity costs by noting that the wife had been on notice that such an application may be made since at least 6 March 2013. Of course, merely notifying a litigant that you intend to seek indemnity costs from them does not, in and of itself, justify an order for indemnity costs.
Counsel for the husband referred to the judgment of Guest J in Limousin & Limousin [2008] FamCA 315 (30 April 2008) as well as the High Court of Australia decision of Penfold v Penfold (1980) 144 CLR 311 and the Federal Court of Australia decision of Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225.
The husband’s argument as to the appropriateness of indemnity costs was, in essence, that the wife has “had the Court on five occasions order various discovery for her to comply” yet “she has chosen not to do so.”
Ms Hurley noted, with reference to the joint judgment of Kay, Holden and Guest JJ in JEL & DDF (No. 2) (2001) FLC 93-083, that the “categories of cases which would be appropriate to make an order for indemnity costs does not appear to have been fully defined.”
I raised with counsel the comments of the High Court of Australia in Penfold v Penfold (Supra) to the effect that “departure from costs on a party and party basis should be of an exceptional kind” that only arises where there are “special or unusual features.”
Counsel also noted, with reference to the decision of the Full Court of this Court in Yunghanns & Yunghanns (2000) FLC 93-029 at 87,471 that “it is not a condition precedent to the exercise of the discretion [to award indemnity costs] that some collateral purpose or species of fraud be established against the party against whom the order is sought.”
Counsel argued that exceptional circumstances were present in the case at hand as the matter should be ready for a trial listing but for the wife’s failure to comply with the orders of this Court. She asked that I send “a very clear message that this Court is not here for dalliance of a party” or for them to “decide and pick what they will or will not do.”
Counsel for the wife argues that there are no exceptional circumstances in the matter at hand that would justify an order for indemnity costs. He argues that the application is also premature, in that there are numerous issues in dispute between the parties, including the “question of discovery and the course that that has travelled” and the “issues around valuation.” He contends that there are a number of disputed facts which render it inappropriate to decide the question of costs on a broader basis on this occasion. Mr Eid argues that the issue of costs should be left for trial.
Non-compliance with orders is a factor that can be relevant to a departure from the usual rule that each party is to bear their own costs in proceedings under the Act (s 117(2A) (c)). Indeed, that factor was determinative in my decision to make any order for costs as outlined earlier in this judgment. However, I am not satisfied that the wife’s non-compliance is enough to substantiate the circumstances of an “exceptional kind” that would justify the “very great departure from the normal standard” as spoken of in Kohan & Kohan (Supra). (eg, see the similar approach taken to requests for indemnity costs in the face of extended non-compliance with Court orders by the respondent to the costs application in the joint judgment of Coleman, Boland and Thackray JJ in Fennessy & Gregorian (2009) FLC 93-399 and in the judgment of Scarlett FM (as he then was) in Gaudry & Gaudry (No 2) (2004) FLC 93-302).
I conclude that the husband’s costs are to be determined on a party and party basis. If the parties are unable to reach agreement on what that figure would be within twenty-one days, the costs are to be assessed by a Registrar of this Court pursuant to Chapter 19 of the Rules.
Conclusion
For the foregoing reasons, I make the orders that appear at page 2 of this judgment.
I certify that the preceding one hundred and twenty-three (123) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe delivered on 29 November 2013.
Associate:
Date: 29 November 2013
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