Carmel-Fevia and Fevia

[2009] FamCA 9

FAMILY COURT OF AUSTRALIA

CARMEL-FEVIA & FEVIA [2009] FamCA 9

FAMILY LAW – COSTS – INDEMNITY COSTS –  Wife sought indemnity costs in a parenting case – Indemnity costs denied – Basis of wife’s application for costs (and indemnity costs) was the significant disparity of financial circumstances of the parties – Question of the need to determine the extent of the disparity discussed – Indemnity costs in parenting cases generally having regard to the amendments to the family Law Act in 2006 considered – Distinction between civil cases and a parenting dispute considered

Family Law Act 1975 (Cth)

Penfold v Penfold  (1980) FLC  90-800
Kelly and Kelly (No.2) (1981) FLC 91-108
Fitzgerald (as Child Representative for A (Legal Aid Commissioner of Tasmania)) v Fish (2005) 33 Fam LR 123
Kohan (1993) FLC  92-340
Colgate-Palmolive Company & Anor v Cussons Pty Ltd(1993) 46 FLC  R22
Yunghanns (2000) FLC ¶ 93-029

APPLICANT: Ms Carmel-Fevia

RESPONDENT: Mr Fevia

FILE NUMBER: MLC 4389 of 2008

DATE DELIVERED: 19 January 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: BY WAY OF WRITTEN SUBMISSIONS

SUBMISSIONS RECEIVED FROM

SOLICITOR FOR THE APPLICANT:	TAUSSIG CHERRIE
SOLICITOR FOR THE RESPONDENT:	SAXBYS LAWYERS

Orders

1. That the husband pay 50% of the wife’s costs of the parenting proceedings in a sum to be agreed and in default of agreement, as assessed.

2. That all other applications by the parties for costs be otherwise dismissed.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4389  of 2008

MS CARMEL-FEVIA

Applicant

And

MR FEVIA

Respondent

REASONS FOR COSTS JUDGMENT

1. On 21 November 2008, I made orders and delivered reasons for judgment in a parenting application between the parties. I provided for each party to make any application for costs by written submission.

2. The wife made an application for costs on 26 November 2008 by way of written submission signed by her counsel.

3. The husband responded by filing a comprehensive submission supported by an affidavit sworn on 11 December 2008. The husband’s submissions were drawn by his counsel.

4. The substantive parenting proceedings related to the parties’ two children then aged 5 years and 2 years. They were heard using the less-adversarial trial process over 6 days in November 2008.

5. In my reasons, I described the proposed position of the husband as “fluid” but one in which he had pursued a “shared care” compromise of either 6 or 7 days out of each fortnightly period.

6. In my reasons, I described the wife’s position as pursuing orders seeking that the husband care for the children on 5 days in each fortnight.

7. The shared care dispute was therefore a modest one.

8. There were also unresolved disputes about holidays but it must be said that several issues were resolved during the conduct of the hearing.

9. I ultimately ruled that this was not a case in which it was in the best interests of the children to spend equal time with their parents but rather 5 nights out of 14 and additional time until school commenced for the youngest child.

10. I also made rulings about the duration of summer holidays and the structure for the term holidays.

11. The wife now seeks costs against the husband.

The application of the wife for costs

1. The wife sought that the husband pay her costs of the parenting proceedings assessed on an indemnity basis or failing the indemnity basis, in default of agreement, as assessed.

2. The argument for the wife in relation to costs can be encapsulated as follows:

   (a)the husband has an “infinitely superior financial position” relative to the wife;

   (b)where there was an “extreme disparity” in the financial positions of the parties, an order for costs could and should be made;

   (c)the husband should fund the litigation about the children, it being necessitated because the parties could not reach agreement.

3. It was said by the wife that the matters to which I have just referred were the basis for the costs order rather than because of conduct or the outcome of the proceedings.

The husband’s position

1. The husband opposed the making of any order for costs.

2. The husband’s underlying premise was that neither party should be “penalised” by a costs order. He said that this case was “finely balanced” in circumstances where both parents were “child-focussed”. As such, he said, the “outcome…was never obvious”. The husband’s position was that there was merit in the proposals of both parties and given the narrowness of the dispute, a “judicial determination” was required.

3. The husband filed an affidavit sworn 11 December 2008 in support of his counsel’s submissions in which he detailed the reaction of the wife towards him subsequent to the making of the orders. He described her as “boasting” to the extent that in respect of the children she had become “unco-operative” and he had sought the advice of the parties’ psychologist Dr L as to what to do.

4. By letter addressed to my Associate, the solicitor for the wife opposed the husband’s reliance upon the affidavit.  To determine the affidavit’s relevance I had to read it. 

5. The nub of the husband’s position can be summed up in his own words:

   If I was ordered to pay [the wife’s] costs, I am concerned that her conduct towards me will become even more hostile and she will become less co-operative.

6. An application for costs is not one in which the principles in Division 12A of Part VII of the Act apply. However, s 117(2A)(g) permits the Court to have regard to such matters, other than those specifically set out, as the Court considers relevant. None of the specific matters in s 119(2A) could be determined on the basis of the affidavit because, in relation to conduct, the matters for example in s 117(2A)(c) refer to conduct during the proceedings. The matters raised by the husband about the wife’s reaction to the outcome are not relevant to the past albeit they may predict the future. In my view, the affidavit adds nothing of relevance to assist me in the cots dispute.

7. Having said that, and by way of comment only, if true, the approach adopted does not augur well for co-operative parenting and in particular, equal shared parental responsibility.

8. The nub of the husband’s position can be summed up in his own words:

   If I was ordered to pay [the wife’s] costs, I am concerned that her conduct towards me will become even more hostile and she will become less co-operative.

9. Whilst the wife’s argument was directed to the disparity of wealth, the husband’s argument was that:

   (a)the wife was not an impecunious litigant; and

   (b)the wife’s costs had not been quantified as a result of which, the Court could not appreciate how any costs order would affect her financial position.

10. The husband’s counsel asked me to consider 4 main issues:

    (a)first, his complaint about the wife’s “winning edge” reaction;

    (b)secondly, the husband had paid all of the costs of Dr L;

    (c)thirdly, the wife’s future financial position may be even better depending upon what happened to her application to set aside a financial agreement; and

    (d)the quantum of the wife’s costs had not been set out.

11. Whilst the ultimate determination of any costs question is a discretionary one, I am being asked here by the wife to determine the question on a discrete basis namely the disparity of financial circumstances between the parties. That simple issue has to be affected by subjective views about the whole case not just the plain fact of the economic disparity.

12. The husband argued that each party not only should, but could, pay their own costs because both had “significant wealth” in their own right and hence the capacity to pay their costs. Whilst I have an understanding that there is a significant difference between the parties’ financial positions, I could only find that in a general sense. In other words, I do not have acknowledged or conceded facts as to the precise nature of each party’s position. In my view, I do not need to know the precise details.

13. In any event, the husband’s submission was that the disparity of wealth in a parenting matter should not be a determining factor where the case was finely balanced and the outcome uncertain. I disagree.

14. In respect of the disparity argument put by the wife, the husband said that he disputed the assertions of the wife’s lawyers about his own wealth but went on to say:

    However, it is fair to say that, on any view, my estimated wealth is significantly higher than the amount of moneys and assets transferred to [the wife] under the Binding Financial Agreement…

15. The husband set out in his affidavit just what amounts and property he had already provided to the wife.

The Principle in Section 117

1. Section 117 of the Family Law Act 1975 (“the Act”) is the relevant statutory provision.  It provides that each party shall bear his or her own costs.  However, pursuant to sub-s (2), the Court may make such order as to costs as it considers just if it is of the opinion that there are circumstances to justify doing so. 

2. In considering what order (if any) should be made the Court is required (inter alia) to have regard to the matters referred to in s 117(2A). They are:

   (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.”

3. In Penfold v Penfold [1] High Court of Australia said that the general rule expressed by s 117(1) was not paramount to s 117(2). That is, when a court finds circumstances justifying an order for costs, the principle that each party should bear their own costs should give way.

   i)[1] (1980) FLC ¶ 90-800

4. Thus, S 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.

5. In Kelly and Kelly (No.2)[2] The Full Court said that a great disparity of financial resources between the parties may of itself justify an order for costs. In Kelly, the trial judge had found that the husband controlled a corporate entity. The company’s assets and resources along with those of the husband meant that he had control of assets in excess of $1.5 million. The wife on the other hand had assets of $36,500. There was also a significant difference between the parties’ respective incomes. The parties argued that each should pay the costs of the other. The trial judge referred to Penfold determining that ''conduct'' was the only ground upon which justification for an order for costs could be contemplated. The Full Court rejected the trial judge’s approach pointing to the various statutory matters to be contemplated in a costs application. The Full Court said that a judge has considerable discretion and concluded that in that case there was a great disparity in the financial circumstances of the parties.  Their Honours said:

   The husband's assets and financial resources which he controls by far outweigh those of the wife. She is not receiving legal aid. These circumstances might well have justified an order for costs in the wife's favour whatever the conduct of the husband in the proceedings.

   ii)[2] (1981) FLC 91-108

6. The principle in Kelly (no.2) has to be cautiously considered because I do not accept that it is a simple statement that the disparity in every case justifies an order for costs and in particular, in a parenting case.

7. To determine whether or not there is a justifying factor to depart from the principle that each party should bear their own costs, one needs to look at all of the matters set out in s 117(2A) as well.

8. At the same time, it is important to look at s 117(2A) (g) which provides that the Court should consider any “other matters” it considers relevant. Those additional words make clear that the discretion is extremely wide.

9. In Fitzgerald (as Child Representative for A (Legal Aid Commissioner of Tasmania)) v Fish (2005) 33 Fam LR 123 the Full Court observed that, nowhere in s 117(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 any indication as to the comparative weight of the factors set out in sub-s (2A). As a consequence, that there is nothing to prevent any factor being the sole foundation for an order for costs. That is the basis of the wife’s case here.

Section 117 (2A) matters

1. The financial circumstances of the parties do not need to be considered in isolation nor as to any precise quantum. It is conceded by the husband that he has much greater resources than the wife. The question is whether the disparity, whether large or not, justifies a court from departing from the principle that each pays their own costs. The husband argued that notwithstanding the disparity, the wife could still afford to pay her own costs. He said I was not able to know from the documents what impact her costs would have on her financial position. Those matters too are to be taken into account.

2. It would be self-evident that the wife is not eligible for any legal aid type assistance.

3. Nothing of significance needs to be said about the conduct of the parties here in relation to the proceedings. The wife does not make her application for costs on a conduct basis notwithstanding that during the conduct of the proceedings her Senior Counsel’s cross-examination and final submissions were directed to that general concept. Apart from those issues, each party provided all of the necessary material as required by the orders I made and participated in the trial process co-operatively.

4. There is no serious allegation in the submission of either party that the other has not complied with previous court orders. There is a suggestion that the wife’s conduct in corresponding with the single expert may have warranted criticism to such an extent that it justified an order for costs but apart from hearing some brief argument about that, neither party seriously suggested that that issue affected the outcome of the proceedings. It is certainly asserted by the husband as a discretionary consideration that the wife has become difficult but I would hope that that will pass with the fullness of time when other litigious issues are resolved and the orders I have made settle the daily lives of these children.

5. As I have indicated, it is also not to the question that either party has or has not been unsuccessful.

6. The logic behind making financial disparity a relevant consideration lies in the fact that there can be problems for the less-economically strong party when they have little choice but to litigate or succumb to the desires of the economically stronger party. Although that is not so bluntly asserted here, there can be no doubt that the wife adopted the approach put by the forensic psychologist as one with which she could compromise. As late as his Senior Counsel’s final address, the husband’s position remained fluid setting out what his desired position was. That fluidity along with the husband’s non-acceptance of the wife’s position which to a very large degree was supported by the forensic psychologist meant that the wife had no real choice but to continue on. That has a bearing on my discretion when I consider the economic disparity of the parties albeit that I do not know with precision just how great that disparity really is. It seems to me therefore that the fact that the less-economically strong person could still afford to pay their legal costs is one but not the only consideration in the economic disparity argument. In saying that, it is clear that costs are not a punishment but rather a form of compensation for the party who is largely obliged to litigate. I find that to be the case here and for that to be a circumstance which justifies a departure from the provision of S 117(1) that each party bear their own costs.

Conclusion

1. Contemplating all of the factors, but particularly the economic disparity of the parties, I find that there is justification for an order for costs in favour of the wife.

2. However, it must also be said that there were issues about which the wife adopted a position such as the holidays and holy days where the husband had issues that needed to be resolved either at the door of the Court or indeed during the running of the proceedings. It would be an inappropriate exercise of discretion to order the husband to pay all of the wife’s costs. In my view, the resorting by the parties to the Court was largely as a result of the position adopted by the husband.

3. The matter of what those costs should be however is still a disputed issue because it is sought that those costs should be awarded on an indemnity basis.

Indemnity costs

1. Costs being ordered on an indemnity basis is an exception in this Court rather than the rule (see Kohan[3] and Colgate-Palmolive Company & Anor v Cussons Pty Ltd[4]).

   iii)[3] (1993) FLC ¶ 92-340

   iv)[4] (1993) 46 FLC ¶ R22

2. Chapter 19 of the Rules makes clear that costs to be paid by parties to their lawyers should be within the range set out by the schedules unless the parties knowingly contract out of the rules.

3. Where a party applies for an order for costs on an indemnity basis, the Court must be informed if the party is bound by a Costs Agreement in relation to those costs, and if so the terms of the Costs Agreement. I have been advised there is a Costs Agreement and its details. 

4. In Yunghanns[5] the Full Court said that the categories of circumstances that might give rise to an indemnity order are not closed.  The Court said at 87,471:

   …and 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 repayment of costs other than on a party/party basis’.

   v)[5] (2000) FLC ¶ 93-029

5. I do not accept that the disparity of financial circumstances, whilst a basis for making an order for costs, is a basis for making an order for indemnity costs. Indemnity costs orders in a parenting case should be reserved for cases where the conduct of a party is anything but child-focussed, is calculated to cause emotional harm to the other parent or conducted in circumstances where there could be no justification for the sorts of orders sought or for the conduct of the litigation itself.

6. Indemnity costs in parenting cases must be far more difficult to obtain since the 2006 amendments to the Act because under Division 12A, the Court is obliged to determine the course of the proceedings including the evidence to be led and the strength and breadth of cross-examination.

7. In civil jurisdictions, expressions about collateral purposes, ulterior motives and fraud are often discussed. Parenting cases are different. Since 2006, apart from the provisions of Division 12A, the Act has contained s. 117AB which reads:

   (1)      This section applies if:

   (a)proceedings under this Act are brought before a court; and

   (b)the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.

   (2)      The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings.

1. It will be seen therefore that the Act now has several provisions which should be contemplated carefully before resorting to the making of an order for indemnity costs.

2. There is nothing in the conduct of the husband that would warrant me making an indemnity costs order as a result of what occurred during the hearing.

3. As such, I cannot find that there are any special or indeed unusual matters or facts in this case that would give rise to a finding that there were exceptional features of the case that would in turn justify a departure from the ordinary practice in relation to the payment of costs.

Certifying for counsel

1. The wife also sought certification for the attendance of both senior and junior counsel. I do not understand the husband to cavil with that. Each party was represented by both senior and junior counsel.

2. Rule 19.50 of the Family Law Rules 2004 provides for a court to certify that it was reasonable to so engage counsel including Senior Counsel. This was a case in which the factual matrix of the families was complicated by the children of the husband’s earlier relationship(s) but there were also religious issues of some complexity. It was of such complexity for the husband to so engage Senior Counsel. I find that it was reasonable in the circumstances for both parties to engage Senior and Junior Counsel and I propose to so certify.

Quantum of Costs

1. Notwithstanding the economic disparity of the parties, there is nothing in the material that I heard during the case nor read in the submissions of the parties which would justify an order that the husband pay all of the wife’s costs. I have already pointed out the discretionary and indeed arbitrary nature of a costs order in these circumstances. Having found no conduct to warrant an order for indemnity costs, I also find that there were issues that the wife needed resolved. On that basis, she should and clearly can, contribute towards her costs.

2. On the basis that the husband has the much greater economic circumstances, I consider that he should contribute 50% of her costs determined according to the schedules to the Family Law Rules in relation to the parenting proceedings.

3. Whilst it is desirable to avoid an assessment of costs if this is at all possible, I do not have the relevant evidence to enable a discretionary determination nor any understanding of what the parties have realistically incurred in relation to costs. Whilst I appreciate that the assessment of costs in itself is time consuming and expensive, I have little confidence that the parties could reach agreement and see the inevitability of a formal assessment.

4. I propose to so order.

I certify that the preceding Sixty Three (63) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  19 January 2009