Catlin & Catlin
[2018] FamCA 235
•17 April 2018
FAMILY COURT OF AUSTRALIA
| CATLIN & CATLIN | [2018] FamCA 235 |
| FAMILY LAW – COSTS – Where the wife asserts that the husband was wholly unsuccessful – Where the husband asserts that the wife was not wholly successful – Whether the wife was substantially successful – Whether costs should be on an indemnity or party and party basis – Quantum of costs – Where the husband argues that the wife proceeded prematurely – Consideration of costs pursuant to section 117(2A) of the Family Law Act 1975 (Cth). |
| Family Law Act 1975 (Cth) s 117(2A) Family Law Rules 2004 (Cth) rr 19.08(1), 19.08(3), 19.18(1), 19.18(3) |
| Kohan & Kohan (1993) FLC 92-340 | ||
| APPLICANT: | Ms Catlin | |
| RESPONDENT: | Mr Catlin |
| FILE NUMBER: | ADC | 748 | of | 2014 |
| DATE DELIVERED: | 17 April 2018 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 16 March 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mrs Tinning |
| SOLICITOR FOR THE APPLICANT: | Tindall Gask Bentley |
| COUNSEL FOR THE RESPONDENT: | Mr Ower SC |
| SOLICITOR FOR THE RESPONDENT: | 1878 Elix Lawyers |
Orders
That the husband pay to the Trust Account of Tindall Gask Bentley for and on behalf of the wife her costs fixed in the sum of TWENTY THOUSAND FOUR HUNDRED AND FIFTY DOLLARS ($20,450) inclusive of GST on or before fourteen (14) days from the date of this order.
That if the applicant shall fail to pay the costs sum as provided for herein THEN interest shall run on the outstanding amount of such payment from the date of default to the date of payment as prescribed by the Family Law Rules.
That the application for costs do otherwise stand dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Catlin & Catlin has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 748 of 2014
| Ms Catlin |
Applicant
And
| Mr Catlin |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Amended Application in a Case filed 10 July 2017 Ms Catlin (“the wife”) sought to enforce the provisions of a binding financial agreement executed by the parties on 22 July 2016 and sought that Mr Catlin (“the husband”) pay costs of and incidental to the Amended Application on an indemnity basis, or on a party/party basis. By her Affidavit filed 14 February 2018 the wife seeks that the husband pay her costs of and incidental to the enforcement proceedings either on an indemnity basis or in accordance with the Supreme Court Scale.
Following a hearing on 21 September 2017 orders were made on 13 October 2017 in the following terms:-
(1)That the husband do pay to the wife within 28 days the sum of EIGHTEEN THOUSAND SIX HUNDRED AND THIRTY DOLLARS AND SIXTY TWO CENTS ($18,630.62).
(2)That the husband be restrained and an injunction granted restraining him from pursuing any litigation in respect of the costs of the pool fence erected by him in the sum of THIRTEEN THOUSAND SEVEN HUNDRED AND FIFTY DOLLARS ($13,750).
(3)That all proceedings do stand dismissed.
The orders disposed of the Amended Application in a Case filed 10 July 2017.
The focus of the wife’s claim was that the husband was in arrears in respect of the following:-
· Spousal maintenance in the sum of $17,411.81;
· Non-periodic child support in the sum of $719.45;
· Outstanding outgoings in relation to the former matrimonial home in the sum of $1,150.87; and
· Outstanding private school fees for the children to M School in the sum of $14,664.68 and to L School in the sum of $29,856.25.
As at the date of the hearing on 21 September 2017 the husband had satisfactorily resolved outstanding school fees and had made payments in reduction of the amount outstanding by way of spousal maintenance and thereafter conceded the amount outstanding of $17,992.40.
The wife also sought interest in respect of the outstanding sum of $726.99.
With arithmetical precision, the husband sought to set off various expenses totalling $17,992.
By reference to my reasons in Catlin & Catlin [2017] FamCA 818 at [80] – [82] I found that the wife’s claim should be brought to account at $19,669.42 with an offset in favour of the husband of $1,038.80 resulting in judgment being entered in favour of the wife in the sum of $18,630.62.
The outstanding issue is the wife’s application for the costs of and incidental to the amended application on an indemnity basis or such amount as agreed or in default of agreement as assessed, or on a party/party basis.
APPLICATION FOR COSTS
Pursuant to r 19.08(1) of the Family Law Rules 2004 (Cth) (“the rules”), the wife has applied for an order that the husband pay her costs. The application is made by Amended Application in a Case.
The wife also seeks an order for costs to be paid by the husband on an indemnity basis. Rule 19.08(3) of the rules provide:-
A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
The method of calculation of costs is referred to in Rule 19.18 of the rules:-
(1)The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
Sub-rule 19.18(3) of the rules provides that the Court may consider:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
In considering what orders should be made, if any, in respect of the wife’s costs, s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) requires the Court to have regard to the following:
(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 fact, 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.
Accordingly, I have a wide discretion in respect of matters relating to a potential costs order.
Should an order for costs be made in favour of the wife?
The wife relies on her Affidavit filed 14 February 2018. The husband elected not to file an answering affidavit but rather, relies upon the contents of the wife’s affidavit but with particular reference to certain of the annexures.
The husband’s counsel conceded that if the Court determines that the wife should be awarded costs then there will be no opposition or submission based upon the husband’s financial circumstances that he is not able to meet the quantum of any order.
It is also not argued that the wife’s financial circumstances is a relevant consideration.
The wife argues that the proceedings were necessitated by the husband failing or refusing to comply with previous orders of the Court, in particular the payment of the children’s school fees, spousal maintenance and certain outgoings in relation to the former matrimonial home.
The wife also argues that the husband has been wholly unsuccessful in his opposition to the wife’s claim by reason of a purported setoff.
The wife commenced the current proceedings by Application in a Case filed 6 June 2017 seeking the enforcement of the husband’s obligation to pay spousal maintenance in the sum of $17,411.81 and non-periodic payments in relation to the children by way of child support in the sum of $719.45. The wife also sought outstanding outgoings in relation to the former matrimonial home in the sum of $1,150.87.
The application was supported by a comprehensive affidavit.
The Amended Application filed 10 July 2017 supplemented the wife’s claim by seeking to enforce payment by the husband for the children’s private school tuition fees.
The wife contends at [9] of her Affidavit filed 14 February 2018 that it was only as recently as 20 June 2017 that she became aware that the husband was in arrears in relation to the school fees.[1]
[1] Wife’s affidavit filed 14 February 2018 (Wife’s affidavit).
The wife’s solicitors forwarded a letter of demand to the husband’s solicitors dated 4 July 2017.[2]
[2] Wife’s affidavit annexure “LWYC-33”.
By response dated 7 July 2017 the husband’s solicitors advised that an application had been filed to discharge or suspend the third party debt notice issued on behalf of the wife on 8 June 2017 and that there existed a genuine dispute as to the amount payable under the final orders made on 22 July 2016.[3]
[3] Wife’s affidavit annexure “LWYC-34”.
In any event, the husband asserted that the third party debt notice prevented him from making arrangements with the children’s private schools to resolve outstanding fees.
The husband had forwarded correspondence to M School acknowledging that there are outstanding tuition fees and other charges and that it was the intention of the husband to pay the amounts as required, but the third party debt notice remained an impediment.[4]
[4] Wife’s affidavit annexure “LWYC-35”.
By letter dated 10 July 2017, the wife’s solicitors advised the husband of the quantum of the outstanding amounts and the following appears:-
We ask that you confirm in writing that your client intends to make payment of the amount of $14,664.68 due to [M School] and the amount of $29,856.25 due to [L School] to enable the children to return to those schools in Term 3 2017.
Please provide us with particulars regarding when those payments are going to be made and then provide us with receipts for the same so that our client can properly consider her position in relation to the Third Party Debt Notice.[5]
[5] Wife’s affidavit annexure “LWYC-36”.
By order made 19 July 2017, the non-periodic child support pursuant to order 47 of orders made 22 July 2016 to the children’s private schools was fixed and that the husband was ordered to pay the set amounts to the respective schools.
The husband argues that the Amended Application filed 10 July 2017 was unnecessary in circumstances where the parties were in active negotiation and it was therefore premature for the wife to proceed by way of further litigation.
There is some merit in the husband’s argument although I consider there is little merit in the proposition that the third party debt notice provided a comprehensive explanation for his apparent refusal or neglect to pay the outstanding school fees expeditiously.
There is no suggestion on the part of the husband that his obligation was unclear and his confirmation to the school acknowledging the debt provides some support for that position.
The gravamen of the proceedings was the extent to which the husband could maintain a set off against the wife’s claim for arrears of spousal maintenance in the sum of $17,411.81.
Of the total set off claimed by the husband of $17,992, the most significant component was the cost of the pool fence installation at $13,750.
The wife argues that the husband has been wholly unsuccessful in that the total set off claimed by him was only allowed in the sum of $1,038.80 with the pool fence argument being completely rejected.
In Penfold & Penfold (1980) FLC 90-800 consideration was given by the Full Court to the extent to which an applicant had been substantially successful in the relief sought and whether that should be a factor in determining an order for costs. The majority of the Full Court said at 75,054:-
… True it is that the appellant obtained only some of the orders which she sought. However, it appears that she would have obtained other orders, those relating to the enrolment of the children as boarders in educational institutions, but for the circumstance that after the hearing before the vacation judge and immediately before the hearing before Allen C.J. in F.L.D. the respondent agreed to the arrangements proposed. …
I consider that for a finding to be made that the husband was “wholly unsuccessful” does not require the wife to establish that no part of the husband’s claim for a set off was successful.
The converse consideration is whether the wife was wholly or substantially successful in her claim.
The totality of the post-settlement proceedings have sought to enforce the terms of settlement as embodied in the final orders and the binding financial agreement.
Accordingly, the husband was wholly unsuccessful in maintaining the cost of the pool fence as a set off against the outstanding spousal maintenance arrears.
The husband’s claim did meet with some success in terms of the setting off of the private health insurance and contribution to conveyancing costs in the total sum of $1,038.80, but this is also tempered by the wife’s successful claim for interest in the sum of $726.99 and an amount of unpaid outgoings in the sum of $950.03.
The wife has been substantially successful in maintaining the integrity of the outstanding amounts that she sought to be enforced, whereas the husband has been solely unsuccessful in his opposition to the wife’s claim by reason of a set off being the cost of the pool fence.
The wife should be entitled to her costs of the enforcement proceedings.
QUANTUM OF THE WIFE’S COSTS
The wife seeks an order for costs on an indemnity basis in the sum of $35,208 or in the alternative by reference to the Supreme Court scale the sum of $31,304.78. Any order for costs is to be paid within seven days. [6]
[6] Wife’s affidavit [79.2]-[79.3].
The husband opposes the wife’s order but in the event that a costs order is made, it should be calculated by reference to the party/party costs of the wife and to be reduced in any event to reflect that a portion of the wife’s costs related to the enforcement of the outstanding school fees in circumstances where the husband was prepared to pay but was prevented from doing so by the wife issuing the third party debt notice. The husband also contends that whilst the solicitors were negotiating a resolution of the school fees, the wife was pre-emptive in filing the enforcement application.
Both parties urged the Court to determine the quantum of the wife’s costs rather than require the amount to be determined following a taxation of costs by a Registrar.
The wife annexes the following documents to her Affidavit of 14 February 2018:-
· Retainer Agreement for property settlement and parenting matters;[7]
· Correspondence to the wife from her solicitor with respect to costs;[8]
· Counsel fees charged;[9]
· Schedule of costs and disbursements actual charges;[10] and
· Schedule of costs and disbursements (scale rates);[11]
[7] Annexure “LWYC-47”.
[8] Ibid.
[9] Ibid.
[10] Annexure “LWYC-48”.
[11] Annexure “LWYC-49”.
THE CALCULATION OF THE WIFE’S FEES BY THE LACK OF AN ITEMISED ACCOUNT
The order for costs as sought by the wife in the Amended Application in a Case was $9,900 on an indemnity basis or $836.85 on a party/party basis. I am not able to reconcile the significant difference between the two amounts as sought. The disparity is not explained by reference to the wife’s solicitors’ costs being charged at a rate above scale. The assumption is that the higher amount reflects not only the above scale charge out rate as referred to in the retainer document, but also significant solicitor/client engagement.
By reference to correspondence between the wife and her solicitors dated 13 January 2017 the following appears:-
Full description of the type of disbursements we usually charge is included in our costs and retainer agreement of 6 May 2015. In light of your instructions to undertake work in relation to the enforcement of the orders I believe a more accurate estimate of resolving your matter is $2,500 - $4,500 inclusive of GST which does not include counsel fees.
Following a review of the wife’s costs she was advised by letter dated 21 February 2017 that the costs incurred for the enforcement action was in the sum of $3,463.98 inclusive of GST with a disbursement amount of $183.78 inclusive of GST. The letter of advice confirms that:-
Your work in progress includes all of the professional fees recorded by members of the firm staff (including solicitors and administrative staff) in relation to your matter to date.
The balance of the letter of 21 February 2017 refers to the wife’s fees up to 6 September 2016 which were outstanding in the sum of $89,642. Care must be undertaken not to conflate the wife’s outstanding fees with those incurred in the enforcement action.
By letter dated 11 July 2017 the wife’s solicitors advised her that her costs were in the sum of $3,239.69 inclusive of GST, that disbursements had increased to $439.98 and that the updated fee estimate was $10,706 inclusive of counsel fees.
The estimate of counsel fees for the hearing on 20 September 2017 and if necessary 21 September 2017 was in the range of $10,500 to $14,000 excluding GST.
The hearing was confined to one day only.
By letter dated 22 September 2017 the wife’s solicitors provided her an updated fee estimate in the sum of $21,871.37.
A further sum was sought to cover the costs of the hearing on 16 March 2018.
INDEMNITY COSTS
The explanatory guide to the rules has been accepted by the Court as an accurate definition of “indemnity basis”; namely:-
An entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.
The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 is of assistance in determining whether and in what circumstances an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said in Kohan at 79,605:-
…it is fundamental to the exercise of the discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s 117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said at 156:-
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of the courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
In Prantage (supra) the Full Court said at 87,209:-
97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded that this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
I do not consider that the matters before the Court were of significant complexity. The application was to enforce certain outstanding amounts and to meet the husband’s set off claim.
While the wife may well have considered that the husband was unreasonable in the manner in which he conducted his opposition to the enforcement proceedings, at all times he conceded that his financial circumstances were irrelevant both to whether enforcement orders should be made and the quantum of any costs that should be ordered.
The affidavit material of the wife is voluminous. Much of it seeks to explore and comment on the husband’s financial position and circumstances. The extent to which the wife maintained her interest in the husband’s circumstances is self-evident by reference to her solicitor’s letter of 1 September 2017 seeking a level of disclosure that was unnecessary to property prosecute her application.[12]
[12]Wife’s affidavit annexure “LWYC-50”.
Taking into account the cost of counsel fees incurred for the costs hearing on 18 March 2018 and noting that counsel was not required on 20 September 2017, I propose to assess the wife’s costs on a party/party basis and have as a starting point the schedule of costs and disbursements prepared by reference to the scale rate at $31,304.78.
I bring to account my determination that whilst the schedule of costs has been prepared by reference to the scale, the quantum reflects solicitor/client costs rather than party/party costs.
I propose to bring to account the costs as charged but to apply a discount and to fix the wife’s costs in the sum of $20,000 plus $450 for the costs of attendance on 16 March 2018. Consistent with the method of preparation of the schedule of costs, the total sum of $20,450 is inclusive of GST.
Senior counsel for the husband acknowledged that within the reasonable parameters of the proceedings the husband will be able to pay any costs order and accordingly I consider that this should be reflected in the time allowed for payment. I will give the husband 14 days to pay the total sum of $20,450.
I make orders as appear at the commencement of these reasons.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 17 April 2018.
Associate:
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