Brodeway & Fenton
[2023] FedCFamC1F 247
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Brodeway & Fenton [2023] FedCFamC1F 247
File number(s): SYC 5229 of 2021 Judgment of: SCHONELL J Date of judgment: 5 April 2023 Catchwords: FAMILY LAW – COSTS – Where the wife sought a costs order – Consideration of factors in s 117(2A) of the Family Law Act 1975 (Cth) – Where the circumstances do not justify making an indemnity costs order – Where orders were made by consent and the husband has failed to comply with those orders – Where the husband has not complied with the overarching purpose of family law practice and procedure – Costs ordered as agreed or assessed. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Bant & Clayton (Costs) (2016) 56 Fam LR 31; [2016] FamCAFC 35
Colgate Palmolive Company and Another v Cussons Pty Ltd (1993) 118 ALR 248; [1993] FCA 801
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold and Penfold (1980) 144 CLR 311; [1980] HCA 4
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; [2000] FamCA 681
Division: Division 1 First Instance Number of paragraphs: 41 Date of last submissions: 31 March 2023 Place: Sydney Solicitor for the Applicant: Barkus Doolan Winning Solicitor for the Respondent: Watts McCray ORDERS
SYC 5229 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS BRODEWAY
Applicant
AND: MR FENTON
Respondent
order made by:
SCHONELL J
DATE OF ORDER:
5 APRIL 2023
THE COURT ORDERS THAT:
1.The respondent husband pay the applicant wife’s costs as agreed or assessed in relation to the Application in a Proceeding filed 2 February 2023 including her costs incurred in the bringing of an application for costs, with such costs to be paid within 28 days of agreement or assessment.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Brodeway & Fenton has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
On 2 February 2023, the applicant wife (“the wife”) by way of Application in a Proceeding filed 2 February 2023 sought various orders seeking in part compliance with consent orders made by the Court on 14 October 2022. On the return date of that application, agreement was reached in relation to the matters the subject of the application with the exception of costs. Consequently, orders were made for the filing of documents to deal with the costs application.
DOCUMENTS RELIED UPON
The wife relied upon the following documents:
(1)Application in a Proceeding filed 2 February 2023;
(2)Affidavit of wife filed 2 February 2023; and
(3)Written submissions as to costs.
The respondent husband (“the husband”) relied upon the following documents:
(1)Affidavit of husband filed 10 March 2023; and
(2)Written submissions as to costs.
The wife sought costs in the sum of $9,009 calculated on an indemnity basis. In the alternative, the wife sought costs as agreed or taxed, with the husband to make payment of such costs within 28 days of agreement or assessment. The husband opposed the making of a costs order.
For reasons which will become apparent, I decline to make an order for indemnity costs but will make an order for the husband to pay the wife’s costs as agreed or taxed.
BACKGROUND
The parties commenced cohabitation in or about 1996, married in 2002 and separated on 1 March 2021. There are two children of their marriage.
The wife contends that the parties’ assets include various interests in companies and trusts.
The wife commenced proceedings consequent upon the breakdown of the parties’ relationship on 19 July 2021.
Orders were made on 2 September 2021 for the obtaining of single expert valuations in relation to the property of the parties.
It is apparent from the wife’s affidavit, and not the subject of significant dispute by the husband, that following the making of those orders, attempts were made to try and resolve their financial dispute. That obviously has been unsuccessful.
The matter came before the Court on 14 October 2022 when a Judicial Registrar made various orders by consent. Relevant to this application for costs, the Court noted:
E.The Court is informed that there have been significant delays in relation to valuations for properties, plant machinery and equipment, and corporate and trust entities. The Court is informed that the Respondent Husband has yet to answer disclosure requests or sign a retainer for the Single Expert.
…
H.The parties and their lawyers are reminded of their obligations under clauses 1.4 and 3.13(c) of the Central Practice Direction – Family Law Case Management to engage in productive and resolution-focused communication with each other and to continue to negotiate between Court events.
I.The parties have been advised of the extensive delays in the Federal Circuit and Family Court of Australia with respect to final hearing dates, and the parties are requested to seriously consider referring the matter to Arbitration as an avenue to have the matter determined on a final basis.
J.The parties are requested to seriously consider the financial consequences, legal costs and personal impacts on themselves, their families and on their children associated with pursuing prolonged and extensive litigation in the family law system.
The Court then made orders by consent which included:
4.That by no later than 21 October 2022, the Husband shall provide to the Wife's solicitors:
4.1.a copy of all detailed stock inventories and general inventory listings as at 31 December 2021 and the current date for [B Limited] and [C Pty Ltd]; and
4.2.detailed inventories of all plant, machinery and equipment of all entities the subject of valuation by the single expert accountant as at 31 December 2021 and the current date.
…
6.That by no later than 4pm on 21 October 2022, the Husband shall select one single expert valuer / valuation company nominated by the Wife pursuant to Order 5 and he shall advise the Wife of his selection and of any amendments he requires be made to the letter of instruction to such valuer.
…
8.By not later than 21 October 2022, the Husband shall provide to the Wife's solicitors the current certificates of registration for each motor vehicle owned by each of the corporate and/or trust entities being valued by the single expert accountant together with the following particulars for each such vehicle:
8.1. make, year of manufacture and model; and
8.2. current odemeter [sic] reading.
The Court also noted the following:
Non-Compliance with these Orders
K.The consequences that follow from non-compliance with these orders include (but are not limited to):
a. An order for costs made by a Registrar for a Registrar’s Court event;
b.Referral to a Judge to enable a Judge to consider the making of a costs order (including fixed or indemnity costs) against a non-compliant party; or
c.Referral to a Judge to hear the case on a final basis in the absence of material from the non-compliant party.
In her affidavit, the wife contended at paragraphs 47 to 52 that the husband has not complied with Orders 4, 6 and 8 of the orders made by consent on 14 October 2022. The husband’s affidavit in reply is some 40 paragraphs. Almost the entirety of that affidavit fails to engage with the issues the subject of the application for costs. In particular, despite being given an opportunity to respond, the husband elected not to respond at all to paragraphs 47 to 52.
For the purposes of this application, I assume his failure to respond to those paragraphs was deliberate and that he does not put the matters in issue.
DISCUSSION
The authorities make it plain that an order for indemnity costs is not one that is made lightly and there should be circumstances of an exceptional kind that warrant orders for costs on an indemnity basis. In Kohan & Kohan (1993) FLC 92-340, their Honours in the Full Court observed at 79,614:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r. 2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v. Wright (No.2) “(supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR at 368 to 370.
Indemnity costs orders are still an exception in this and other jurisdictions. …
Justice Sheppard in Colgate Palmolive Company and Another v Cussons Pty Ltd (1993) 118 ALR 248 observed as follows at 256–257:
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1. The problem arises in adversary litigation, ie litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this court the provisions of O 62, rr 12 and 19, and the Second Schedule to the rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4.In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: “the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
The category of cases in which a court may make an indemnity costs order are not closed and are not limited to those identified by Shepard J. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 at 87,471, the Full Court said:
… 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 Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
There is nothing exceptional about the circumstances of this matter. The circumstances for the making of an indemnity costs order have not been made out.
An application for costs is governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”), which provides a general rule that each party to proceedings should bear their own costs.
Section 117(2) reposes in the Court a discretion to make a costs order in circumstances where the Court determines that there are circumstances that justify it making an order and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A).
In Penfold and Penfold (1980) 144 CLR 311, the plurality in the High Court determined that to make an order under s 117(2), the Court needs to make a finding of justifying circumstances as a preliminary prerequisite to the making of an order. Their Honours also observed that terms such as ‘an exceptional case’, ‘special circumstances’ or ‘a clear case’ are not necessary determiners of whether or not an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
It is well-settled law that no one factor under s 117(2A) is determinative and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123, the Full Court observed:
41. … Nowhere in subs (2A) or elsewhere in s 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 subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs
Dealing now with the relative subsections in s 117(2A).
(a) the financial circumstances of each party to the proceedings
The parties are at issue as to the value of their matrimonial property. However, I note the matters contained in the husband’s written submissions to the following effect:
19. Both of the parties to these proceedings, taking into account the assets listed in their respective Financial Statements, stand to be entitled to significant funds at the conclusion of the proceedings. Each will ultimately have significant capital resources at their disposal at the conclusion of these proceedings;
I am satisfied in those circumstances and in circumstances where the husband has paid legal fees of in excess of $50,000 that he has the capacity to meet the order as sought by the wife.
(b) whether the parties are in receipt of legal aid
Not relevant.
(c) the conduct of the parties to the proceedings
The wife contends that the husband’s conduct is relevant to the making of a costs order.
What is relevant is conduct of a party which in some way or other leads to an increase in costs by the other party. Such factors may include uncooperative behaviour, obstruction, prolonging litigation or the bringing of unreasonable or unmeritorious applications. It may include non-disclosure or a failure to comply with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) in relation to disclosure.
I am satisfied that the husband has not complied with Orders 4, 6 and 8 made on 14 October 2022. Those orders were clear on their face and the orders were made by consent at a time when the husband was legally represented. He well knew the obligations imposed upon him by the terms of those orders and the consequence of failing to comply with those orders. In that respect, I refer to what appears in the orders of 14 October 2022 under the heading of “[n]on-compliance with these orders”. The husband has chosen to not engage with the wife’s affidavit in relation to the assertions as to non-disclosure.
The husband’s failure to comply has led to an increase in the wife’s costs.
I accept that the husband’s conduct in the proceedings is a matter that goes to the determination as to whether a costs order should be made.
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court
The proceedings currently before the Court involve unresolved financial proceedings. It could not, therefore, be said that the proceedings were necessitated by a failure to comply with a court order. They are so far necessitated by the failure of the parties to compromise and reach any agreement.
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings
The term “wholly unsuccessful” refers to a situation in which proceedings as a whole have been unsuccessful, rather than necessarily an application (see Bant & Clayton (Costs) (2016) 56 Fam LR 31).
The husband was not wholly unsuccessful.
(f) whether any party has made an offer in writing
No reference was made to any offer in writing.
(g) any other matter the Court considers relevant
There is no other matter relevant.
I also note s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) is as follows:
67 Overarching purpose of family law practice and procedure provisions
(1) The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Note 1: See also paragraphs 5(a) and (b).
Note 2: The Federal Circuit and Family Court of Australia (Division 1) must give effect to principles in the Family Law Act 1975 when exercising jurisdiction in relation to proceedings under that Act.
(2) Without limiting subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 1);
(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court’s overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3) The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4) The family law practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a) the Rules of Court;
(b) any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
The overarching purpose is reinforced by the Rules and the Central Practice Direction – Family Law Case Management (CPD), especially the core principles which include that parties must conduct the proceedings (including negotiations for settlement of the dispute) in a way that is consistent with the overarching purpose.
CONCLUSION
I am satisfied that the husband has not complied with the overarching purpose of family law practice and procedure. I am satisfied that the husband’s failure to comply with orders of the Court have led to the wife incurring costs and that the circumstances justify the making of an order for costs.
Accordingly, I will make an order in the terms as sought by the wife.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 5 April 2023
0
8
0