Carne & Ungaro
[2021] FCCA 1174
•28 May 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Carne & Ungaro [2021] FCCA 1174
File number(s): SYC 8122 of 2017 Judgment of: JUDGE MONAHAN Date of judgment: 28 May 2021 Catchwords: FAMILY LAW – Arbitration Costs – wife seeks costs against the husband – costs sought on an indemnity basis – whether the court has jurisdiction to award costs where matter has been referred to arbitration – power of an arbitrator to award costs –where husband asserts that wife has filed her costs application ‘out of time’ – whether the principals of res judicata apply –whether the principles of issue estoppel or ‘Anshun’ estoppel apply – where property adjustment to wife well exceeded wife’s settlement offer – husband ordered to pay wife’s costs on a party/party basis. Legislation: Family Law Act 1975 (Cth) ss 13E, 117
Family Law Regulations 1984 (Cth), reg 67Q
Family Law Rules 2004 (Cth) Chapter 19
Federal Circuit Court Rules 2001(Cth), r. 21.02, Sch 1Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Fennessy & Gregorian [2009] FamCAFC 44; (2009) FLC 93-399
Hamersley Iron Pty Limited v The National Competition Council [2008) FCA 598
Harb & Harb [2020] FCCA 3544
Kohan & Kohan (1993) FLC 92-340; (1992) 16 Fam LR 245
Prantage & Prantage (Costs) [2013] FamCAFC 105
Yunghanns & Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331
Number of paragraphs: 98 Date of last submission/s: 1 June 2020 Date of hearing: 1 June 2020 Place: Sydney Solicitor for the Applicant: Mr Reeve Solicitor for the Respondent: Ms Nixon ORDERS
SYC 8122 of 2017 BETWEEN: MS CARNE
Applicant
AND: MR UNGARO
Respondent
ORDER MADE BY:
JUDGE MONAHAN
DATE OF ORDER:
28 MAY 2021
THE COURT ORDERS THAT:
1.The Respondent pay the Applicant the sum of $25,132 as directed in writing by the Applicant within 42 days from the date of these orders (“the due date”) with interest to accrue on the sum at the rate set by Rule 22.01 of the Federal Circuit Court Rules 2001 (Cth) from the due date until such time as the amount is paid in full.
2.All extant cost applications be otherwise dismissed.
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 under the pseudonym Carne & Ungaro is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
This determination arises from an Application in a Case filed by MS CARNE (“the Applicant”) against her former husband MR UNGARO (“the Respondent”) following an Arbitration of the parties’ property dispute.
In summary, the Applicant seeks that her costs be paid by the Respondent on an indemnity basis, or in the alternative, on a party/party basis as agreed or assessed. The Applicant argues that a costs order should be made in circumstances inter alia where there is evidence that the Respondent rejected three written offers to settle the matter that were less than the total amount awarded to the Applicant by the Arbitrator.
The Respondent opposes an order for costs being made against him. The Respondent also seeks an order that his costs in relation to the Application in a Case paid by the Applicant. This, in turn, is opposed by the Applicant.
At the hearing of the costs application on 1 June 2020, the Applicant was represented by Mr Reeve and the Respondent was represented by Ms Nixon. The parties’ legal representatives made oral submissions on that day but otherwise relied on their written submissions provided to the Court.
Unless otherwise stated, any statutory references I make in these reasons will be to the Family Law Act 1975 (“the Act”), and to the Federal Circuit Court Rules 2001 (“the FCC Rules”).
BACKGROUND
The Applicant was born in 1972 and she is currently 48 years of age. The Respondent was born in 1968 and he is currently 52 years of age.
The parties commenced cohabitation in 2003 and married in 2015.
The parties separated during October 2016 and a divorce order was made on 5 March 2018.
There are no children of the marriage.
The Applicant filed her Initiating Application for property proceedings on 18 June 2018. The Respondent filed his Response on 24 August 2018.
The proceedings came before me in a duty list on 29 August 2018 and on that occasion, I made orders for the parties to attend a Conciliation Conference with a Registrar of this Court on 22 November 2018. The parties duly attended that Conference but were unable to resolve their dispute.
When the matter returned before me on 6 February 2019 the parties consented to orders pursuant to section 13E of the Act for their dispute to be referred to arbitration before Mr Giles Coakes (a former Judge of this Court).
On 29 July 2019 the parties attended a pre-arbitration conference with Mr Coakes (“the Arbitrator”). On that occasion, the Arbitrator made directions for the provision of further disclosure and the filing and serving of material to be relied upon at hearing. Those directions were complied with by both parties and the arbitration was heard on 4 and 5 September 2019. At the conclusion of the arbitral hearing, the Arbitrator made directions that parties file written submissions according to a timetable. The parties each complied with this timetable. The Arbitrator also made directions that the parties had leave to approach in relation to any matter.
On 2 December 2019 the Arbitrator handed down his Award and Reasons for Award.
On 3 December 2019, the Applicant filed an Application to Register Arbitration Award. The Respondent did not seek to object to the registration of the Arbitration Award.
On 9 January 2020 the parties complied with terms of Arbitration Award. This required the Applicant to transfer a property at Suburb B to the Respondent and for the Respondent to pay the Applicant the sum of $510,036.00.
On 14 January 2020, I made orders that the Arbitration Award be registered as if it were a decree of this Court.
On 11 February 2020, the Applicant filed the relevant costs application which came before me for directions on 4 May 2020. As the cost application was opposed, I listed it for hearing on 1 June 2020. The costs hearing duly proceeded before me on 1 June 2020. Following the hearing judgment was reserved.
DOCUMENTS
In addition to their written submissions, the parties asked the Court to read the following documents.
Applicant
The Applicant relied on the following:
·Application in a Case filed 11 February 2020;
·Her Affidavit sworn 7 February 2020;
·Application to Register Arbitration Award filed 3 December 2019;
·Affidavit of Service filed 3 December 2019; and
·Her Affidavit sworn 13 August 2019.
The Applicant also tendered the following documents:
·An electronic tender bundle pages 1 to 67 (Exhibit ‘AW1’);
·A copy of the signed Arbitration Agreement dated 29 July 2019 (Exhibit ‘AW2’); and
·A copy of the Arbitration Award (Exhibit ‘AW3’).
Respondent
The Respondent relied on the following:
·Response to Application in a Case filed 23 March 2020; and
·His Affidavit sworn 23 March 2020.
The Respondent also tendered an electronic tender bundle pages 1 to 7 (Exhibit ‘RH1’).
ISSUES
As stated, the Applicant seeks an order that her legal costs be paid by the Respondent on an indemnity basis. In this alternative, the wife seeks that her costs be paid on a party/party basis.
The Respondent opposes an order for costs being made. The Respondent argues that there are two issues that require determination before the Court should proceed to determine the costs application; they are:
·firstly, an argument that the Court lacks jurisdiction to hear the costs application as the application was filed out of time and leave should not be granted to hear the application; and
·secondly, in the alternative, the Applicant is estopped from seeking the orders she seeks by the principles of res judicata and/or issue estoppel and/or Anshun estoppel.
If the Court is against the Respondent in respect of the above two issues, then the Respondent argues, thirdly, that there are no grounds to justify the making of a costs order in this case. If the Court was of the view that a costs order should be made, then the Respondent argues, fourthly, that costs should be limited to ‘party/party costs’ only. The Respondent also seeks that the Applicant pay his costs associated with the Application in a Case.
The Applicant asks the Court to reject the arguments raised by the Respondent. That said, in the event that the Court finds that a costs order in this matter is not appropriate for any reason, the Applicant submits that it would not be appropriate to make an order as to costs against her for bringing this costs application.
LAW
Subject to the Court’s consideration of the legal challenges raised by the Respondent to the Court’s jurisdiction to determine a costs order in this matter, I make the following comments about the law relevant to costs applications at this point of these reasons.
Court’s power to make a costs order
Pursuant to Rule 21.02 of the FCC Rules, this Court has the power to make an order for costs at any stage in the proceedings or within 28 days after a final decree or order is made or within any further time allowed by the Court.
In addition, in family law matters, the Court also needs to consider section 117(1) of the Act which states the principle that each party shall pay their own costs. The exception to that rule is contained in section 117(2), which relates to circumstances where the Court finds there is justification for departing from the principle. This exception is subject to the matters referred to in section 117(2A) of the Act.
Section 117(2A) of the Act states:
“In considering what order, if any, should be made under subsection (2), the Court will 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 the pleadings, particulars, discovery, inspection, directions to answer questions, admission of the facts, production of documents and similar matters;
(d)Whether the proceedings were necessitated by a failure of a party to the proceedings to comply with the 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) Any such other matters as the Court considers relevant.”
Quantum of costs
Unless the Court otherwise specifies, costs are paid on a ‘party/party’ basis rather than on an ‘indemnity’ basis.
Party/party costs are costs necessarily incurred, paid at a reasonable rate. As previously stated, the FCC Rules incorporate a schedule of costs as a guide to party/party costs in family law proceedings. Party/party costs would not ordinarily cover all the legal costs incurred by a party.
Indemnity costs are ordered when the Court intends the costs order to cover all the legal costs reasonably incurred by that party. When a costs agreement is involved, the charges to be imposed on the other party are subject to the requirement of reasonableness. I note that ‘indemnity costs’ are not defined in the FCC Rules.
The authorities in family law cases are very clear that indemnity costs will only be made in exceptional circumstances. In Fennessy & Gregorian [2009] FamCAFC 44; (2009) FLC 93-399 (“Fennessy”) the Full Court of the Family Court of Australia,[1] discussed the issue at length and made reference to a number of cases in which the question of indemnity costs was considered.
[1] Coleman, Boland and Thackray JJ.
Amongst their discussion was reference to their earlier decision of Kohan & Kohan (1993) FLC 92-340; (1992) 16 Fam LR 245 in which their Honours held that there is “nothing in s 117 or 123 of the Family Law Act 1975 (‘the Act’) prevents the Court making an order for costs on an indemnity basis” and that:
“2.The intent of s 117(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. Order 38 rule 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); Wentworth v Rogers (No 5); Hobartville Stud v Union Insurance Co.
3.Indemnity costs orders are still an exception in this and other jurisdictions.”[2]
[2] (1993) FLC 92-340 at [2].
The judgment in Fennessy additionally referred to comments made in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 in which Sheppard J held:
“24….
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 …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 evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo)… 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)…”[3]
[3] (1993) 118 ALR 248 at [24].
Finally, Fennessy looked at the decision in Yunghanns & Yunghanns (2000) FLC 93-029; (2000) 26 Fam LR 331 where their Honours “acknowledged that the category of cases in which an indemnity costs order is appropriate is not closed.” In particular, their Honours considered 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.”[4]
[4] (2000) FLC 93-029; (2000) 26 Fam LR 331.
Lastly, I note that Rule 21.02 of the FCC Rules allows the Court to refer the costs for assessment via Chapter 19 of the Family Law Rules 2004. That said, when party/party costs are ordered, the usual approach of this Court is to fix the amount pursuant to Schedule 1 of the FCC Rules.
DISCUSSION AND FINDINGS
The Court will now discuss the relevant issues presented by this dispute in light of the relevant law, the available evidence and the submissions made by the parties.
Whether the Court has jurisdiction to determine the costs application
As stated, the Respondent argues that the Court lacks the jurisdiction to determine the costs dispute in this matter. This arises because the Respondent asserts that the Applicant filed her Application in a Case ‘out of time’ or that the Court lacked jurisdiction because the Applicant should have sought that her costs application be determined by the Arbitrator. These arguments are disputed by the Applicant.
Argument that the costs application is ‘out of time’
The Respondent argues that the Applicant did not file her costs application within the 28 day time limit required by Rule 21.02 of the FCC Rules (referred to earlier in these reasons). More particularly, the Respondent argues that the Applicant should have filed the costs application within 28 days of the Arbitration Award being made on 2 December 2019. The Respondent submits that the Order I made on 14 January 2020 that the Arbitration Award be registered “as if it were a Decree” of this Court means that the Award becomes a Decree made by the Court on 2 December 2019.[5]
[5] Respondent’s submissions, paragraph 18.
Consequently, the Respondent submits that:[6]
19. … the Act and Judge Monahan’s orders mean that the date for filing an Application for costs ran from 2 December 2019, when the Arbitration Award was made. It is the only logical conclusion that can be drawn from the operation of the Act.
20. Section 13H of the Act does not impose a duty on parties to register the arbitration award. Instead, as noted by the word “may” as emphasised above, it provides an avenue for the parties to register the arbitration award should they wish. This would presumably be so that the parties may make use of the enforcement powers of the Courts.
21. That being the case, it is unnecessary for parties to register an arbitration award immediately following an arbitration. Indeed, if the parties comply with the terms of an arbitration award, there may be no need for the arbitration award to ever be registered.
22. There is also the possibility, however, that a party may wish to register an arbitration award well after the award has been handed down in order to enforce orders. If a party were to register an arbitration award, say, two years after the award were handed down, it would be illogical and not in the interests of justice that a costs application in relation to the primary proceedings would be able to be filed and heard.
23. Bringing that back to these proceedings, it follows that the time for filing the Application for costs ran from 2 December 2019. The time for filing an Application for costs therefore expired on 30 December 2019.
24. The present application has been filed 41 days out of time.
[6] Respondent’s submissions, paragraphs 19-24.
Argument that the costs dispute should only be determined by the Arbitrator
The Respondent also argues that the Court lacked jurisdiction to determine the costs dispute because it should only be determined by the Arbitrator.
The Respondent submits:[7]
25. In addition, Arbitrator Coakes made directions on the final day of the arbitral hearing, 5 September 2019, that either party had leave to approach the Arbitrator in relation to any issue arising in relation to the conduct of the matter. This direction was not made ‘pending further direction’ or otherwise expressed to be an interim direction. The direction was not otherwise dispensed with by the Arbitration Award. The power of the parties to approach the Arbitrator, it would seem, remained until the Court registered the Arbitration Award and dismissed all extant applications, thereby acknowledging that the totality of the proceedings had been dealt with.
26. It is submitted that the Applicant had reasonable opportunity to approach the Arbitrator for a determination as to costs. The Applicant did not take this opportunity in circumstances where Arbitrator Coakes had the power to make such a determination as to costs. The Court should not, in our respectful submission, now allow an Application to be heard that was filed grossly out of time where there are no circumstances that prevented the Applicant from approaching the Arbitrator and seeking a dete1mination as to costs. There is no Application before the Court seeking an extension of time by the Applicant and in the circumstances the Court should not now grant any such extension.
27. Alternatively, the Applicant also had the opportunity to file an Application in a Case with the Federal Circuit Court from 2 December 2019. It is our submission that this would have been the wrong forum, however the court could then have referred the matter back to Arbitrator Coakes for determination before the Arbitration Award was registered.
28. It is submitted that the Court does not have jurisdiction to hear the matter because the Application was filed out of time, the Applicant has not sought leave and there are no grounds for granting leave to hear the Application out of time, and as outlined below, it is Arbitrator Coakes, and not the Court, that had jurisdiction to make a determination as to costs. It is fu1iher submitted that Arbitrator Coakes does not now have the jurisdiction to hear the matter as to costs as his referral of power ended when the Arbitration Award was registered and all then extant applications were dismissed.
[7] Respondent’s submissions, paragraphs 25-28.
Applicant’s response
In response, the Applicant makes the following submissions:
1. The Husband asserts in his written Submissions filed 18 May 2020 that the Wife has filed her Application for Costs out of time. The reason provided for this is at paragraph 18 of the Husband’s Submissions, which states that the Orders dated 14 January 2020 provided that the Arbitration Award dated 2 December 2019 is treated as if it were a decree of the Court from the date of the Award and not the date of the Orders.
2. That assertion is not correct. If that was the intention of Section 13H(2) of the Act, it would need to specifically provide that and it does not.
3. It would also not make any sense for that to be the intention of Section 13H(2). If the Husband was correct in his assertion, then an Application for Costs by the Wife would be immediately out of time as it had been more than 28 days after the date of the Award at the point it was registered by the Court.
4. It would also mean that it would never be possible to bring an Application for Costs following an Arbitration, as Regulation 67Q provides that other parties are provided a 28 day period after service of the Application to Register an Arbitration Award to bring to the Court’s attention any reason why the Award should not be registered. Accordingly, the Court cannot register the Award until that time period has lapsed.
5. The Husband makes the point at paragraph 20 of his Submissions that Section 13H of the Act requires that the parties may register an Arbitration Award. He states that a party would presumably do so if they wanted to make use of the enforcement powers of the Courts. Another obvious reason is if they wished to bring an Application for Costs.
6. At paragraph 22 of his Submissions, the Husband uses an example in his Submissions of a party seeking costs after registering an Award two years after the Award was handed down. It is not clear what relevance that example has to these proceedings. In this case, the Wife filed an Application to Register the Arbitration Award the day after the Award was handed down. Regarding the Husband’s example, the Court would have jurisdiction to hear the Costs Application. The failure of the Applicant in that example to take steps to make the application for a period of 2 years, would be a matter to be considered under section [117(2A)(g)].
7. In the event that the Court finds that the wife is out of time to make a Costs Application, the wife seeks leave to do so out of time and relies upon the following:
18.1[8] The wife genuinely believed that she had brought her Application in time.
18.2 There is great hardship to the Wife if her Application for Costs is not heard, given that she incurred significant costs to have her matter determined at Arbitration and the Arbitrator’s findings about the Husband’s conduct in the proceedings and his findings about the husband bringing false evidence in the proceedings.
18.3 That there is no hardship to the Husband on the application being heard.
[8] The Respondent numbers the sub-paragraphs “18.1”, “18.2” and “18.3” in her written submissions.
Findings
The Court agrees with the Applicant’s submissions. The strict interpretation proffered by the Respondent would be inconsistent with the 28 days following service afforded by Regulation 67Q of the Family Law Regulations 1984 for a party to bring to the attention of the Court any reason why the Arbitration Award should not be registered.
If I am wrong, then this would be a case where the Court would be persuaded to extend the time for bringing an application for costs as permitted by Rule 21.02(1)(c) of the FCC Rules.
In any event, I am satisfied that the Application in a Case was not filed out of time. The costs application was filed literally within 28 days of the Orders I made on 14 January 2020.
I also disagree with the Respondent’s argument that the Court lacked the jurisdiction to hear the costs application because it should have been determined by the Arbitrator. That said, I agree that the Arbitrator did have the power to make a costs order. Contractually, this was provided by paragraph 51 of the Arbitration Agreement and is referred to as a power of the Arbitrator in paragraph 5(r) of Schedule B to the Arbitration Agreement. Nevertheless, in this case, the costs application was filed after the Arbitration Award was registered as if it were a decree of this Court. Moreover, I am satisfied that notwithstanding the referral of the “totality of proceedings between the parties pursuant to Part VIII/VIIIAB”, the Court remains at all times vested with jurisdiction. This view was also expressed by His Honour, Judge Harman in the decision of Harb & Harb [2020] FCCA 3544. At paragraphs 47 and 48 of that decision his Honour stated:
47. … The Court can hear and determine Applications in an arbitration, can determine issues with respect to applicable law or principle and can, including of its volition, terminate the referral to arbitration if it is considered necessary or appropriate, although the circumstances in which that would occur would be extremely limited.
48. Thus, I am satisfied that the Court’s jurisdiction is, at it were, collateral with that of the arbitrator, and the parties are entitled to either ask the Court to determine the issue, as they are proceedings before the Court, or to have the arbitrator determine the issue. Thus, I am satisfied I am seized with jurisdiction.
The Court will now move onto the second issue raised by the Respondent.
Whether the Applicant is estopped from seeking a costs order against the Respondent
The Respondent argues, in the alternative, the Applicant is estopped from seeking the orders she seeks in her Application in a Case. The Respondent relies on the principles of res judicata, issue estoppel and Anshun estoppel.
The Respondent asks the Court to note that these legal principles were well summarised by the Honourable Justice Weinberg in the Federal Court of Australia case of Hamersley Iron Pty Limited v The National Competition Council [2008) FCA 598 at paragraphs 56 to 58:
First, the judgment extinguishes any cause of action which is the subject of the decision. If the cause of action is established, it is said to merge in the judgment. If the cause of action is rejected, the parties are estopped from claiming that it continues to exist. Consequently, no further proceedings may be brought as between the parties (or their privies) to enforce that particular cause of action. This effect is sometimes described as cause of action estoppel or res judicata.
Second, the judgment of the court represents a conclusive determination not only of the ultimate finding in the case but also of all issues of fact or law necessary to the decision. This is generally described as issue estoppel.
Third, the decision may preclude the parties from raising in future proceedings causes of action or issues which they could and should have raised in the former proceeding. This extension of res judicata and issue estoppel is generally known in Australia as Anshun estoppel.
Respondent’s argument
The Respondent argues that:
·because this Court made Orders on 6 February 2019 pursuant to section 13E of the Act to refer the totality of the proceedings between the parties to Arbitration; and
·because of the Arbitrator’s powers in paragraph 5(r) of Schedule B to the Arbitration Agreement (referred to previously); the Arbitrator “had the power to determine an application for costs and make an order for costs”.[9]
·In addition, the Respondent submits that “an application for an order as to costs has been before the court since the Applicant commenced these proceedings”.[10] In this respect that Respondent asks the Court to note that both parties sought orders for the parties to release each other “from all actions, proceedings, claims, demands, costs and expenses whatsoever and howsoever arising which either of them had or may have against the other for or by reason of or in respect of any act, cause, matter or thing”.[11]
[9] See Respondent’s submissions, paragraph 35.
[10] Respondent’s submissions, paragraph 36.
[11] Respondent’s submissions, paragraphs 37-38.
In relation to the res judicata argument, the Respondent makes the following submissions:[12]
[12] Respondent’s submissions, paragraphs 39-45.
39. It is submitted that the orders sought by each of the parties are orders as to costs. It is general practice in this Court, particularly in respect of orders by consent, that orders that each party pay their own costs are made.
40. The Macquarie Dictionary defines “cost” when in a legal context, as:
Law the sums which the successful party is usually entitled to recover for reimbursement of particular expenses incurred in the litigation.
41. The Family Law Rules 2004, which apply where the Federal Circuit Court Rules 2001 are insufficient or inappropriate [see Rule r 1.05(2)], provides that costs is defined as:
an amount paid or to be paid for work done by a lawyer, and includes expenses [see Family Law Rules 2004 (Cth) Dictionary (costs)].
42. In the absence of evidence to the contrary, the term “costs” should be given the true meaning attributed to it by the Family Law Rules which accords with the ordinary meaning, when considered in context. It is submitted that “costs” as referred to in both the Applicant's Initiating Application and the Respondent's Response to Initiating Application refers to costs as defined at paragraphs 40 and 41 above.
43. In his Arbitration Award, Arbitrator Coakes made an award [at 14] in the following terms:
Both the Applicant Wife and the Respondent Husband hereby release the other from all actions, proceedings, claims, demands, costs and expenses whatsoever and howsoever arising which either of them had or may have had against the other for or by reason of or in respect of any act, cause, matter or thing.
Such order is in identical terms to the order sought by both the Applicant and the Respondent.
44. Arbitrator Coakes had the power to make an award as to costs and by force of the Arbitration Award, Arbitrator Coakes did in fact make an award as to costs. That being the case, the Applicant cannot now seek to relitigate a decision that has already been made. The Applicant by the present Application is seeking to relitigate the costs issue that was rightly determined by Arbitrator Coakes.
45. The Applicant is estopped under the principle of res judicata from seeking the orders she now seeks.
In relation to the issue estoppel argument, the Respondent makes the following submissions:[13]
46. In the event that the Court finds that “costs” does not refer to legal costs, it is submitted that the determination as to costs was an issue of law that was necessary to be determined per the principles of issue estoppel.
47. This is grounded upon the fact that the order for arbitration required the arbitrator to deal with “the totality of the proceedings” as well as the fact that the arbitrator had the power to make such an award.
48. The Applicant should be estopped under the principle of issue estoppel from seeking the orders she now seeks
[13] Respondent’s submissions, paragraphs 46-48.
In relation to the Anshun estoppel argument, the Respondent makes the following submissions:[14]
49. In the alternative, it is submitted that the Applicant could have raised the issue as to costs in the arbitral proceedings, and indeed this was the correct forum to raise such an application.
50. In the event the order sought in the Applicant’s Initiating Application is not interpreted to mean legal costs, the Applicant failed to raise an issue as to costs at the arbitration in circumstances where the totality of the proceedings were referred to Arbitrator Coakes.
51. The Applicant should be estopped under the principle of Anshun estoppel from seeking the orders she now seeks.
[14] Respondent’s submissions, paragraphs 49-51.
Applicant’s responding arguments
In response, the Applicant makes the following submissions:[15]
[15] Applicant’s submissions, paragraphs 8-17.
8. The Husband also asserts that the wife is not able to seek costs in an Order before the Court, and could only have sought them from the Arbitrator. The Husband provides 2 reasons for this being that the Orders dated 6 February 2019 referred the totality of proceedings to the Arbitrator and that the Arbitration Agreement provided that the Arbitrator could make a Costs Award.
9. Order 2 of the Orders dated 6 February 2019 is as follows:
Pursuant to Section 13E of the Family Law Act 1975, the totality of proceedings between the parties pursuant to Part VIII/VIIIAB are referred to Arbitration such to be conducted by Mr Giles Coakes (being an arbitrator appearing upon the list of qualified arbitrators maintained by AIFLAM pursuant to Regulation 67B Family Law Regulations 1984) as agreed between the parties or such other arbitrator as agreed between the parties.
10. Section 13E of the Act provides that a Court may refer Part VIII proceedings (property matters between spouses) or Part VIIIAB proceedings (property matters in de facto relationships) to an Arbitrator for Arbitration. The Order dated 6 February 2019 provided that the totality of proceedings between the parties pursuant to Part VIII are referred to Arbitration. Section 117 of the Act is under Part XV of the Act, not Part VIII.
11. In the Arbitration Agreement, the Power to make an Order as to costs is reposed in the Arbitrator. Although, this power may be ultra vires.
12. Clause 51 of the Arbitration Agreement is as follows:
The parties to the dispute acknowledge and confirm that the power granted to the Arbitrator to resolve the dispute includes a power to award costs under Section 117(2) of the Family Law Act including:
(a) The costs of that part of the proceedings which were dealt with by the Court before the matter was referred to arbitration where no costs order was made or the question of costs was expressed to be reserved to the trial Judge or generally;
(b) The costs of each party in relation to the Arbitration including the Arbitrator’s fees and disbursements;
(c) The costs of each party legal representation (whether fixed on a party-party, solicitor own client or indemnity basis) which are properly recoverable when a costs order is made by a court.
13. This Clause does not and cannot provide the Arbitrator with exclusive power to make an Order as to costs. If either party had sought the Arbitrator make an Order as to costs and the Arbitrator had made such an Order, it would be of questionable effect as the power to make a costs order does not fall within the referral made by the Court.
14. Even if the Court finds that the Arbitrator did have the power to determine a Costs Application, that does not mean that the Wife is estopped from filing a Costs Application before the Court. It does not mean the power is exclusively with the Arbitrator.
15. Adopting the Husband’s own logic, enforcement proceedings are also proceedings incidental to Part VIII proceedings and therefore you would expect that his view is that a party to an arbitration is estopped from bringing that incidental application before the Court. However, the Husband has submitted that an appropriate reason to register an Arbitration Award would be to bring enforcement proceedings before the Court (paragraph 20). The Husband cannot have it both ways.
16. It is also unlikely that a Court exercising power in relation to matrimonial causes under the Family Law Act would interpret a private contract (the Arbitration Agreement) as either intending or being capable of ousting the Court’s discretion in relation to costs. Costs and costs orders are traditionally part of the Court’s either inherent or incidental power. That power is exercised on occasion to discipline or to restrain litigation behaviour of parties. It has a public policy aspect and a utility to a court which would not be easily given away; see Oshlack v Richmond River Council [1998] HCA 11 and see also Idoport Pty Limited v National Australia Bank [2001] NSWSC 744.
17. The Husband’s submission that a proposed Order in the Wife’s Initiating Application intended to prevent the parties from seeking Costs Applications against each other in these proceedings (paragraph 37) is not correct. Clearly, that proposed Order is intended to sever the parties’ financial affairs and has no regard to costs applications that could arise pursuant to these proceedings.
Findings
The Court is not persuaded by the Respondent’s submissions.
While the Court agrees that the Arbitrator had the power to make a costs order, the Court has already determined that it remained at all times vested with jurisdiction notwithstanding the referral of the “totality of proceedings between the parties pursuant to Part VIII/VIIIAB”.
The Court is satisfied that the Applicant correctly raised the question of costs following the registration of the Arbitrator’s Award, which by virtue of the Orders made on 14 January 2020, is a decree of this Court.
The Court will now consider the issue of whether a costs order should be made in this case.
Whether a costs order should be made
As stated, this requires the Court to consider the factors set out section 117(2A) of the Act in light of the available evidence.
Financial circumstances of each party
Both parties assert modest financial circumstances and have incurred legal costs.
The Applicant earns approximately $650 per week as a health care worker. The Applicant has qualifications including a Masters degree. At the time of the arbitration, the Applicant was working as a health care worker, however, she gives evidence that she is currently not able to do so due to a meniscus tear in her left knee. The Applicant has a de-facto partner who receives $400 per week from a disability support pension.
The Respondent earns $1,136.08 per week working full-time a public servant. The Respondent also earns additional income on an ad-hoc basis. The Respondent asserts that he holds significant debt, including a loan from Bank C of approximately $500,000 and a debt to the Australian Taxation Office of $68,621.69. The Respondent also has a loan from his parents amounting to $9,848.48.
The Applicant asks the Court to note that at the time of the arbitration, the Arbitrator found that the Respondent held $247,864 across four bank accounts. I note that in the Arbitrator’s Award, the Arbitrator agreed with the Applicant’s submission that the Respondent’s property included monies held in certain bank accounts by the Respondent’s parents.[16]
[16] Arbitrator’s Award, paragraph 104.
At the time of filing the Application in a Case, the Respondent owned an unencumbered property at Suburb B although I note that he has now borrowed significant funds referred to above secured against this property.
I note the following submissions made by the Applicant in reply to the Respondent’s submissions:[17]
18. In relation to the Husband’s assertion that he holds significant debt, it is of significance that he only became encumbered by the mortgage to Bank C after his Solicitor received notice of the filing of the Application in a Case.
19. The Husband did not need to obtain a mortgage in order to pay out the amount of $510,036.00 on 9 January 2020.
20. It is submitted by the Wife that the husband obtained the mortgage in an effort to mask the true extent of his capacity to pay a Costs Order to the Wife. It is open to the Wife to make such a submission, considering the findings made by the Arbitrator in relation to the husband’s conduct in the proceedings and his bringing of false evidence (Paragraphs 31 and 32 of the Wife’s Affidavit filed 7 February 2020).
21. Significantly, the husband also deposes to earning a higher income than he did at the time the Arbitration was held and now being in full-time employment.
[17] Applicant’s submissions, paragraphs 18-21.
Overall, the Court finds that the Respondent has capacity to meet a costs order.
Receipt of Legal Aid
Neither party were in receipt of Legal Aid.
Conduct of the parties
The Applicant asks the Court to note that the Arbitrator made a number of findings in relation to the Respondent’s conduct in the proceedings:[18]
The Husband claimed he simultaneously held $217,509.25 in a share trading account and $245,000 in a bank account at the commencement of the relationship. The Arbitrator found that the Husband did not have both these assets at that time as separate assets and that the most likely explanation was that the Husband had converted his shares into cash (W29).
The Husband also claimed that he held a joint share trading account of $125,000 with his brother at the commencement of the relationship. The Arbitrator found that the Husband did not have this asset at the commencement of the relationship. The Husband did not provide any documentary evidence of the account and did not call his brother as a witness (W30).
The Husband claimed that at the time of separation, he owed a loan to his parents of $125,000. He provided a copy of a loan agreement that the Husband claimed was signed on 15 July 2001. Significantly, not only did the Arbitrator find that the debt did not exist, the Arbitrator found that the loan agreement was a sham document and a false document (W31).
The Husband claimed that at the time of separation, he owed a debt to his father of $48,500 pursuant to an Invoice. The Arbitrator found it was prepared for the sole purpose of making an invalid claim (W32).
The Husband transferred the total sum of $254,001 to his father following separation. The Husband was later repaid $40,000. The Arbitrator held that the amount of $214,001 held in his parent’s bank accounts at the time of Arbitration was the property of the Husband. (W34, Award 104). Accordingly, the only conclusion available is that the Husband transferred the sum to his parents in an attempt to defeat the Wife’s interests.
[18] Applicant’s case outline document, page 5.
The Applicant also asks the Court to note that in relation to her conduct, the Arbitrator found that the Wife’s evidence “generally was credible, coherent and fair”.[19]
[19] Arbitrator’s Award, 49.
The Respondent submits as follows:[20]
64. The Applicant by her case seeks to create a nexus between the findings of Arbitrator Coakes as to evidentiary matters and costs incurred by her. The Court could not find that the Respondent's conduct justifies an order for costs.
65. Arbitrator Coakes found, on the evidence available, that a loan agreement between the Respondent and his father did not exist. Although conduct has some importance to the question of costs, it is not the case in this matter.
66. Arbitrator Coakes found, on the evidence available, that the Respondent's initial contribution was less than what he claimed but nevertheless found that the Respondent made a greater initial contribution than the Applicant.
67. The Respondent deposed that he had lost significant amounts of documents when moving between households. This resulted in having limited documentary evidence as to the loan and to his initial contributions.
68. The Respondent was entitled to run his case based on his memory of facts that were in dispute and the limited documentary evidence he did have. The Respondent gave evidence that he believed was true. The fact that certain issues went against him when the Arbitrator considered the evidence as a whole does not mean that he was not entitled to present his case or that costs should be awarded simply because the Applicant's case was preferred by the Arbitrator. To do so would be against the general principle that each party bear their own costs [Family Law Act 1975 (Cth) s 117(1)].
69. The case law shows that it is not generally the case that a party obtains a costs order simply because it has been found that there has been negative conduct on behalf of one party. There generally needs to be some link between the conduct and the cost incurred on the part of the Costs Applicant [See, e.g. Rose & Barwon (No. 2) (2010] FamCA 738]. The Applicant has not shown any link between the Respondent's conduct and additional costs.
70. It is submitted that the Court should consider as significant the Respondent's positive conduct that saved the parties additional costs including that at the first opportunity, the Respondent agreed to have the matter determined by arbitration after the matter was not settled at a conciliation conference. Such decision by the Respondent (and the Applicant) undoubtedly saved the parties significant sums of money and certainly saved the parties time. Given the unfortunate delays in this court, it is likely that the proceedings would not have been resolved at this juncture had the parties not agreed to arbitrate.
71. Further, the Applicant was not put to any additional expense relating to the issue of the loan agreement.
[20] Respondent’s submissions, paragraphs 64-71.
In her written reply submissions, the Applicant states:[21]
22. There is of course a nexus between the costs incurred by the Wife and the Husband’s conduct in the proceedings. The Husband sought to include significant liabilities to his parents in the Balance Sheet. The Wife had no other choice but to go to great cost to have the issue determined at an Arbitration. If the Husband had not sought to include the liabilities in the Balance Sheet, it is far more likely that the matter would have settled by consent. In fact, on several occasions the Wife sought to resolve the matter by making an offer to the Husband for a lower amount than she ultimately received pursuant to the Award. The Husband did not accept any of the Wife’s reasonable offers (Paragraphs 35, 39, 41, 43, 45 and 47 of the Wife’s Affidavit filed 7 February 2020).
23. This is not a matter where the Arbitrator preferred the evidence of one party over another. The Arbitrator made clear findings that the Husband had brought false evidence to the proceedings (Paragraphs 31 and 32 of the Wife’s Affidavit filed 7 February 2020).
24. In fact, the Husband’s continued assertions in his Affidavit filed 23 March 2020 (paragraph 22) and his Submissions that the debt to his parents was a legitimate one and the loan agreement and invoice he relied upon in the proceedings were true documents is further evidence of his gross and extraordinary conduct in these proceedings. Clearly, the Award by the Arbitrator and his Reasons were not enough to dissuade the Husband from bringing false evidence or swearing a false Affidavit before the Court. This conduct demonstrates why indemnity costs are appropriate in this case.
[21] Applicant’s submissions, paragraphs 22-24.
Failure to comply with previous Court Orders
Neither party makes any allegation of a failure to comply with previous orders. The parties appear to have complied with all Orders made by the Court and by the Arbitrator.
Whether a party is wholly unsuccessful
Neither party argues that the other was wholly unsuccessful.
That said, I note the following submissions from the Respondent:[22]
73. It is the nature of family law proceedings that the Court (or in this case, the Arbitrator) is often charged with making judgments based on the merits of two competing but meritorious positions. In this case, the fact that the Arbitrator awarded the Applicant a greater sum of money than the Respondent sought she be awarded does not mean that the Respondent's case was unmeritorious or without basis.
74. It is submitted that the Respondent was not wholly unsuccessful. This is demonstrated by the fact that the Applicant was not wholly successful and the Arbitrator made orders that the Respondent sought, including the order as to costs.
[22] Respondent’s submissions, paragraphs 73-74.
Offers of settlement
There is evidence that the Applicant made three written offers to settle the matter throughout the course of proceedings. Each offer was less than the total amount awarded to the Applicant by the Arbitrator. The Applicant’s lowest offer was made on 28 November 2018 and was to transfer the Suburb B property to the Husband for receipt of a payment of $400,000.
The Respondent made four written offers to settle the matter throughout the course of proceedings. Each offer was less than the total amount awarded to the Applicant by the Arbitrator. The Respondent’s highest offer was made on 28 November 2018 and was for the Applicant to transfer the Suburb B property to him in receipt of a payment of $350,000. That said, on 5 August 2019 (being a month prior to the Arbitration) the Respondent made a reduced offer of $329,838 being paid to the Applicant in return for a transfer of the Suburb B property to him.
The Respondent makes the following submissions:[23]
77. These offers were made on the basis of net assets of the parties of $1,516,000 [see Letter from D Law Firm to Mr E dated 10 October 2017]. Arbitrator Coakes found that the net assets as at the time of the Arbitration were $1,738,860.
78. It is submitted that due to the significant discrepancy between the net assets at the time the offers were made, as they were understood by the Applicant, and the net assets at the time of the arbitration, it cannot be said that the Respondent was imprudent in not accepting either the 14 March 2018 or the 8 May 2018 offers.
79. The Applicant made an offer on 28 November 2018 that the Respondent pay the Applicant $400,000.00. Based upon the evidence the Respondent believed was available at the time, it was not imprudent for him to not accept that offer.
[23] Respondent’s submissions, paragraphs 77-79.
Any other matter
Neither party raised any other matters to consider that have not already been commented upon in these written reasons.
Findings
Having considered the evidence and submissions in light of the available evidence and the relevant authorities, the Court is satisfied that it should depart from the principle in section 117(1) of the Act that each party should pay their own legal costs.
The Court finds that a cost order should made in the Applicant’s favour. The Court is persuaded by the arguments raised by the Applicant, and in particular, the evidence that the Applicant made an offer to settle the dispute for the sum of $400,000 which was considerably less than the amount of $510,036 ordered by the Arbitrator. While I acknowledge that the Respondent’s argument that there were differences in the parties’ views as to amount of the property pool (being approximately 13%), the difference between the lowest offer made the Applicant and the final determination is approximately 21.5%. While the Applicant benefitted from the receipt of the higher sum determined by the Arbitrator, the Applicant (and the Respondent) also expended considerable extra money on the legal costs associated with the arbitration.[24]
[24] During submissions the applicant disclosed that her legal costs were approximately $108,833 and the respondent disclosed that his legal costs were approximately $60,000 up to and including the arbitration hearing: Transcript, 1 June 2020, pages 5 and 14 and Exhibit ‘AW1’.
The Court is also satisfied that there should be an order for the Respondent to pay the Applicant’s costs of this application.
The Court finds accordingly.
What should be the quantum of the costs order
As stated, the Applicant seeks an order that her costs be paid on an indemnity basis, or in the alternative, on a party/party basis.
Submissions
The Respondent argues that if a costs order was to be made, the assessment of costs should be limited to party/party costs only.
The Applicant argues:[25]
The Husband’s conduct throughout the proceedings is indeed out of the ordinary. The Husband did the following:
· He pursued a case that sought to claim his initial contributions were far greater than they were found to be (W29, 30).
· Brought false evidence in the form of a sham loan document for the purposing of attempting to establish a debt to his parents of $125,000 at the date of separation and an invalid tax invoice used to attempt to establish a separate debt to his father of $48,500 (W31, 32)
The Wife went to great expense in excess of $100,000, in order that findings of fact were able to be made on those issues.
This is despite the Wife making reasonable offers of settlement throughout the proceedings. All of her offers made were for smaller amounts than she ultimately received. The Respondent Husband rejected each of these offers and never made an offer that approached a fair and equitable outcome for the Applicant Wife.
[25] Applicant’s case outline document, page 6.
In response, the Respondent argues:[26]
80. Should the court rule that costs are payable, it is submitted that such costs should be as at scale.
81. The starting point for the quantum of costs is that a party entitled to costs is entitled to costs in accordance with Parts 1 and 2 of Schedule 1 and disbursements properly incurred. It is submitted that there is no basis for awarding costs above the scale costs. The Full Court has held “the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges” [see Kohan and Kohan (1992] FamCA 116].
82. In the event that the Court seeks to depart from the scale of costs, it is submitted that costs should not be made on an indemnity basis. The Full Court has stated “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 Kohan and Kohan [1992] FamCA 116].
…
84. It is submitted that the circumstances of this case are not ‘of an exceptional kind’. Accordingly, costs should not be awarded on an indemnity basis. Moreover, a depa1ture from costs on a party/party basis is only in exceptional circumstances [see Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248]. The Full Court has gone further to state that costs on an indemnity basis are exceedingly more rare in this jurisdiction as compared to jurisdictions where the usual rule is that a successful party secures an order for costs [see Prantage & Prantage (2013) FLC 93-544 at 152].
85. The Respondent's position is that there should be no order as to costs but in the event the Court finds that a cost order is justified, it should be at scale for the above reasons.
[26] Respondent’s submissions, paragraphs 80-85.
Findings
The Court agrees with the Respondent’s submissions. This is not a costs dispute where it would be appropriate to make an order for indemnity costs.
The Court finds that costs should be paid on a party/party basis. The Court also finds it appropriate to limit the period of party/party costs to apply only from the 28 November 2018 being the date of the offer by the Applicant for settlement in the amount of $400,000.
The Court also finds it appropriate for the relevant costs to be assessed pursuant to Schedule 1 of the FCC Rules.
The Court also finds that an assessment of costs, pursuant to Schedule 1 of the Rules, would produce costs of $25,132 as follows:
Item 13(a)
6 February 2019
Lump sum $305
Item 7
September 2019
Lump sum $5,921
Item 13(c)
4/5 September 2019
Lump sum $4,482
Item 12
4/5 September 2019
Lump sum $2,241
Item 15
Disbursements
Arbitrator’s fee[27] $5,693
Item 15
Disbursements
Venue hire[28] $550
Item 8
October 2019
Lump sum[29] $1,268
Item 9
2 December 2019
Lump sum $305
3 December 2019
Allow[30] $305
Items 3, 13
11 February 2020
Lump sum[31] $2,172
Item 14
Disbursements
Application in Case fee $165
Item 13(b)
1 June 2020
Lump sum $1,120
Item 9
28 May 2021
Lump sum $305
Item 15
Additional Disbursements
Allow $300
Total
$25,132
[27] Transcript, 1 June 2020, page 7 (rounded to nearest dollar); also see and Exhibit ‘AW1’.
[28] Transcript, 1 June 2020, page 7.
[29] Allowance for written final submissions.
[30] As there is no specific item number that covers the preparation and filing of an Application to Register Arbitration Award and supporting documents, the Court has allowed $305.
[31] Item 3(a) + Item 13(b) $1,867 + $305 (short mention on 4 May 2020).
The Court will allow the Respondent a period of 42 days in which to pay the amount of $25,132 in such method of payment as is directed in writing by the Applicant. If the amount is not paid by the due date then interest will interest to accrue on the amount at the rate set by Rule 22.01 of the FCC Rules from the due date until such time as the amount is paid in full.
CONCLUSION
The Court has found that a costs order should be made in this case.
The Court has assessed that costs in the amount of $25,132 should be paid by the Respondent to the Applicant. The Respondent will have 42 days from the date of the Orders to pay the amount required.
There will be Orders of the Court to reflect this decision.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Monahan. Associate:
Dated: 28 May 2021
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