Bustos and Bustos - [2019] FCCA 3522

FEDERAL CIRCUIT COURT OF AUSTRALIA

BUSTOS & BUSTOS

[2019] FCCA 3522

Catchwords:
FAMILY LAW – Costs – application for adult child maintenance and child support departure – application discontinued – mutual costs applications.

Legislation:
Family Law Act 1975, ss.117, 121

Cases cited:
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; (1993) 28 IPR 561
Eames v Eames [2018] FamCAFC 204 (2018) 340 FLR 148; [2018] FLC 93-866
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Home Office v Harman [1983] 1 AC 280; [1982] 1 All ER 532; [1982] 2 WLR 338
Loomis v ML Lawyer (2016) FLC 93-731; [2016] FamCAFC 168

Applicant:

MS BUSTOS

Respondent:

MR BUSTOS

File Number:

MLC 8200 of 2009

Judgment of:

Judge Riley

Hearing date:

by written submissions

Date of last submission:

1 November 2019

Delivered at:

Melbourne

Delivered on:

5 December 2019

REPRESENTATION

Counsel for the applicant:

None

Solicitors for the applicant:

Manby & Scott

Counsel for the respondent:

Johannes Schmidt

Solicitors for the respondent:

Vic Rajah Family Lawyers

ORDERS

The applicant pay the respondent’s costs of, and incidental to, these proceedings on an indemnity basis, fixed in the sum of $15,099.40.

NOTATIONS

Section 121 of the Family Law Act 1975 provides that it is an offence punishable by imprisonment for up to one year to publish or disseminate to the public any account of family law proceedings which identifies the parties, witnesses or other people concerned with the proceedings, unless specifically authorised by the court.

IT IS NOTED that publication of this judgment under the pseudonym Bustos & Bustos is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 8200 of 2009

MS BUSTOS

Applicant

And

MR BUSTOS

Respondent

REASONS FOR JUDGMENT

Introduction

This is an application for mutual costs orders under s.117 of the Family Law Act 1975 (“the Act”).
By way of background, the parties were married in 1991 and separated in 2009. There were two children of the relationship, Ms A, who is now 21 years old, and [X], who is now 17 years old. Final parenting and property orders were made by consent on 17 March 2010.
On 13 May 2010, the mother filed an application in a case seeking certain orders relating to property. The application in a case was dismissed by Hughes FM, as her Honour then was. Her Honour also ordered the mother to pay the father’s costs of the application in a case fixed in the sum $2,875.
The father said, and it was not challenged, that:
a)he lost his job in April 2018;
b)the Department of Human Services accepted his reduced estimated income for child support purposes;
c)the mother objected;
d)the Department disallowed the objection; and
e)the father has always paid child support as assessed.
On 22 October 2018, the mother issued proceedings in Court A seeking preliminary discovery in relation to child support. The father consented to providing and did provide financial disclosure in the Court A proceeding. The Court A proceeding then appears to have come to an end. The father incurred legal costs in that proceeding of $10,913.
The mother filed the initiating application presently under consideration on 24 June 2019. She sought a child support departure order and adult child maintenance for the parties’ son, [X], who was born on … 2002. [X], at the time of application, was 17 years old and was doing year 11. He will turn 18 on … 2020. It was common ground that the father would continue to pay child support for [X] until he finished secondary school, which was expected to be in about November 2020.
The initiating application filed on 24 June 2019 sought:
a)orders for the father to pay the mother adult child maintenance for [X] from 1 November 2020 until further order;
b)a departure order in respect of child support on the basis that the father’s income was $200,000 per year;
c)any necessary leave; and
d)costs.
The mother filed an application in a case on 5 July 2019 in which she sought orders as follows:
1.These orders be made pursuant to, inter alia, S16 Federal Circuit Court Act.
2.Orders be made clarifying whether, in the bringing of proceedings for adult child maintenance in this matter, the applicant’s lawyer has contravened any of the proscriptions listed in R21.07(1) Federal Circuit Court Rules.
3.The applicant’s costs of this interim proceeding be paid on an indemnity basis equally by both the respondent and his solicitor.
The initiating application and the application in a case were listed for hearing on 27 August 2019.
On 21 August 2019, the father filed a response to the initiating application in which he sought that:
a)the initiating application be summarily dismissed;
b)the application in a case be dismissed; and
c)the mother pay the father’s costs of the proceedings.
On 27 August 2019, the summary dismissal application was adjourned to 8 November 2019, in circumstances where the mother indicated she wished to file further evidence.
On 11 September 2019, the mother filed a notice of discontinuance in respect of her initiating application filed on 24 June 2019.
On 15 October 2019, orders were made by consent in chambers:
a)dismissing the mother’s application in a case filed on 5 July 2019;
b)vacating the hearing on 8 November 2019; and
c)requiring the parties to file written submissions on the question of costs.
The mother filed her written submissions on 31 October 2019 and the father filed his on 1 November 2019.
The father sought his costs on an indemnity basis in the sum of $15,099.40 or, in the alternative, on scale, in the sum of $9,078.84.
The mother sought her costs on scale in the sum of $5,601.

The legislation

Costs applications in family law matters are governed by s.117 of the Family Law Act 1975, which relevantly provides that:
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, 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), (5) and (6) 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.

Financial circumstances

The father’s financial statement filed on 21 August 2019 showed that he has:
a)an average income of $1,916 per week, or $99,632 per year;
b)expenses of $2,993 per week, or $155,636 per year;
c)equity in property of $253,159;
d)superannuation of $52,293; and
e)no additional financial resources.
The mother’s financial statement filed on 24 June 2019 showed that she has:
a)an average income of $1,330 per week, or $69,160 per year;
b)expenses of $1,525 per week, or $79,300 per year;
c)equity in property of $1,282,100;
d)superannuation of $322,000; and
e)no additional financial resources.
The father earns about 43% more than the mother, but he has much greater expenses, including a payment plan with the Australian Taxation Office, which put him into deficit each week. The mother is also in deficit each week, but to a lesser extent than the father. The mother has about five times as much equity in property as the father (including an unencumbered property, which means that she does not have the expense of a mortgage) and about six times as much superannuation as the father.
The father relied on Loomis & ML Lawyer (2016) FLC 93-731, where Murphy J said:
58.It is plain that s 117(2A) does not prescribe that more than one factor must be present or that any one factor has any more or less weight than any other factor referred to within that section. The statutory factors are each and all matters which inform an overall discretion inherent within the section.22
59.Modest or even poor financial circumstances cannot be determinative in the exercise of the discretion in relation to costs. If it were otherwise the discretion inherent in the section would be curtailed and one of the enumerated factors would preclude appropriate consideration being given to all factors relevant to the discretion. Moreover, an impecunious litigant could litigate with impunity – and, indeed, immunity – irrespective of their conduct in the litigation or any other factor pertinent to the discretion in respect of costs. …
22PBF as child representative for AF (Legal Aid Commission of Tasmania) & TRF and LKL (2005) 33 Fam LR 123
The mother did not directly address the issue of the parties’ financial circumstances.
Overall, the mother is in a better financial position than the father. This factor weighs in favour of a costs order against the mother.

Legal aid

Neither party is in receipt of legal aid.

Conduct of the parties

The father argued that the mother, by filing a notice of discontinuance, implicitly conceded that her applications were hopeless. Indeed, the father said that the mother’s applications were abuses of process.
The mother did not disclose in her application to this court the disallowance of her objection to the father’s reduced child support assessment or her Court A proceeding. The mother falsely stated in her application to this court that there were no existing family law or child support orders.
The father said that, if the mother’s application had not been discontinued, it would have been summarily dismissed because:
a)it was merely speculative that [X] would undertake tertiary studies in 2021;
b)even if [X] does undertake tertiary studies in 2021, he may not need adult child maintenance;
c)the father voluntarily provides money to assist Ms A, and it could be expected that he would do the same for [X];
d)the mother sought a final order for adult child maintenance until further order, which is not a proper exercise of the discretion;
e)the adult child maintenance application, being doomed to fail, was obviously made for the collateral purpose of providing a peg for the departure application;
f)once the adult child maintenance application had been dismissed, there would have been no jurisdiction in this court to determine the departure application;
g)the mother breached her implied Harman[1] undertaking by using information derived from the Court A proceeding in the present proceeding;
h)the mother maintained in this proceeding that the husband had an income of $200,000 per year, when she knew from his documents discovered in the Court A that his current income was about $100,000 per year;
i)the mother said in her affidavit that she was hopeful that the parties would reach an early settlement;
j)the mother’s application was brought for the collateral purpose of achieving a settlement to which she was not entitled;
k)the matter was adjourned on 27 August 2019 ostensibly because the mother wanted to file more material;
l)after court on 27 August 2017, the mother sent the father an offer proposing that all applications would be dismissed on the basis that each party would bear their own costs;
m)when that offer was rejected, the mother filed a notice of discontinuance; and
n)the application was essentially a shakedown.
[1] Home Office v Harman [1983] 1 AC 280; [1982] 1 All ER 532; [1982] 2 WLR 338
The mother said that the father’s conduct of the proceeding was wanting because the father’s solicitor wrote to the mother on 3 July 2019 saying that the court had no jurisdiction to determine an adult child maintenance application in respect of [X] at that time, and foreshadowing a claim for indemnity costs from the mother’s solicitor. The mother said that she was accordingly obliged to issue the application in a case filed on 5 July 2019.
The father conceded that his solicitor’s letter dated 3 July 2019 was based on the misapprehension that [X] was only 16 at the time, rather than 17. The father said that the issue could have been resolved by letter, and that the application in a case dated 5 July 2019 was laughable.
The mother also criticised the father’s conduct of the proceeding because he did not file material until 21 August 2019, when he should under the rules have filed by 22 July 2019, and that caused the hearing on 27 August 2019 to be adjourned.
I accept that the father filed his material late. However, I do not accept that the late filing caused the hearing to be adjourned. The mother had time to file responding material if she wished. The hearing was adjourned because it became apparent during the hearing that the mother’s case was seriously flawed, and the mother wanted an opportunity to remedy its deficiencies, even though they looked irremediable at the time.
The father also failed to bring to the hearing on 27 August 2019 his disclosure documents as required by r.25A.08 of the Federal Circuit Court Rules 2001. The father claimed that he did not have to bring the documents, because the matter would be summarily dismissed. In my view, even if a party has a summary dismissal application on foot, that party should bring the required documents to court. However, in the present case, I do not consider that the father’s failure in this regard had any substantial impact on the proceeding.
The mother also criticised the father’s conduct in not voluntarily disclosing his financial information prior to this proceeding being brought. The mother said that refusal required her to institute the Court A proceedings, which was costly for both parties. This matter does not strictly relate to the conduct of this proceeding. In any event, the mother did not have to bring the Court A proceeding. She already had the results of her objection to the child support assessment. The father was under no obligation to voluntarily disclose his financial information. The mother was not allowed to use the information she obtained in the Court A in this proceeding, by reason of her implied Harman undertaking.
The mother also claimed that her applications were not hopeless. She said that she discontinued them because of the costs of litigation. In my view, the mother’s applications were hopeless. Her submission to the contrary is disingenuous.
In my view, the mother’s conduct of the proceeding has been very poor. She breached her implied Harman undertaking, she failed to disclose the existing child support and family law orders, she brought a hopeless adult child maintenance proceeding for the collateral purpose of providing a peg for the departure application and she brought the departure application to get a settlement to which she knew she was not entitled. She brought the application in a case in circumstances where the matter could have been resolved by letter or at the hearing that was already scheduled for 27 August 2019.
On the other hand, the father, through his solicitor’s misapprehension, did unnecessarily complicate matters by asserting that the court had no jurisdiction to deal with the adult child maintenance application at that time and threatening to seek indemnity costs from the mother’s solicitor. The father also filed his material late and failed to bring the required documents to court.
Overall, the conduct of the parties weighs in favour of the father.

Whether any party was wholly unsuccessful

The mother was wholly unsuccessful, as demonstrated by her notice of discontinuance and her consent to orders dismissing her application.
This factor weighs heavily in favour of the father.

Offers of settlement

Following the mother’s filing of the notice of discontinuance, the father offered to resolve the costs issue on the basis that the mother would pay $4,000 towards the father’s costs. The mother rejected that offer.
Consequently, the parties have been put to the added cost of filing written submissions on costs. This factor weighs in favour of the father.

Other matters

I do not consider there are any other relevant matters.

Indemnity costs

The father claimed costs on an indemnity basis. He referred to Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; (1993) 28 IPR 561 where Sheppard J said:
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
…
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 U in Berry v British Transport Commission (supra) and Handley JA in Cachia v Hanes (supra) 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 (supra) 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 U (as he was) in Preston v Preston (supra) at 637; 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 p 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at p 6) similar views in Ragata (supra).
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 (supra)); 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 Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). 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 father also referred to Eames v Eames [2018] FamCAFC 204; (2018) 340 FLR 148; [2018] FLC 93-866, where the Full Court of the Family Court cited with approval the following statement from Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397:
I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
In my view, the mother’s conduct in the present case has been particularly egregious. Her case was hopeless, and she must have known it, she breached her Harman obligations and she brought the proceeding for collateral purposes.
Taking into account all of the circumstances of this case, including the parties’ respective financial circumstances, I consider it to be just to order the mother to pay the father’s costs of the proceeding on an indemnity basis. There was no challenge to the father’s calculation of those costs. There will be an order accordingly.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judge Riley

Associate:

Date: 5 December 2019