Cavendish & Cavendish (No 2)
[2023] FedCFamC1F 548
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Cavendish & Cavendish (No 2) [2023] FedCFamC1F 548
File number(s): SYC 7595 of 2016 Judgment of: HARPER J Date of judgment: 5 July 2023 Catchwords: FAMILY LAW – COSTS – Where husband seeks costs on an indemnity basis – Where wife seeks that no costs orders be made – Where wife was wholly unsuccessful – Where husband made numerous offers of settlement – Where the outcome obtained by the wife at final hearing was worse than would have been achieved had she accepted any of the settlement offers – Wife provided no reasonable explanation for rejecting the settlement offers – Where wife repeatedly failed to comply with disclosure obligations, case management directions of the Court and failed to attend and engage in mediation and settlement in good faith – Where actions of the wife caused the husband to incur unnecessary legal costs – Where husband complied with case management directions and wife did not – A basis for indemnity costs established but evidence from husband did not allow Court to differentiate costs for parenting and property issues – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 6.01 6.06
Cases cited: Atkins & Hunt (Costs) [2017] FamCAFC 131
Cavendish & Cavendish [2023] FedCFamC1F 14
Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; [1993] FCA 536
D & D (Costs) (No 2) (2010) FLC 93-435; [2010] FamCAFC 64
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123; [2005] FamCA 158
Harris & Dewell (No 2) (2018) FLC 93-863; [2018] FamCAFC 180
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Moorcroft & Moorcroft (2020) 60 Fam LR 361; [2020] FamCAFC 83
Munday and Bowman (1997) FLC 92-784; 22 Fam LR 321
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Prantage & Prantage (Costs) [2014] FamCA 850
Re JJT; Ex parte Victoria Legal Aid (1998) 1998 CLR 184; [1998] HCA 44
Division: Division 1 First Instance Number of paragraphs: 49 Date of last submission/s: 31 May 2023 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: York Family Law Specialists Solicitor for the Respondent: Kinghan & Associates ORDERS
SYC 7595 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR CAVENDISH
Applicant
AND: MS CAVENDISH
Respondent
order made by:
HARPER J
DATE OF ORDER:
5 July 2023
THE COURT ORDERS THAT:
1.Within 60 days of the date of these orders, the Respondent Wife pay to the Applicant Husband:
(a)costs of the financial issues in the proceedings in the fixed sum of $85,000; and
(b)costs of the Application subject of this judgment in the amount of $5,000.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cavendish & Cavendish has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are property proceedings between the Applicant Husband, Mr Cavendish (“the husband”) and the Respondent Wife, Ms Cavendish (“the wife”).
On 14 March 2023, I delivered final judgment. The relevant procedural history and background to these proceedings are set out in that judgment: Cavendish & Cavendish [2023] FedCFamC1F 14 (“Cavendish”) at [2]–[14] and [16]–[22]. I will not repeat what I have set out in there unless necessary for this judgment. It should be noted, however, that due to non-compliance by the wife with orders for the preparation of the matter for final hearing, the final hearing proceeded with limited evidence from the wife.
Following the delivery of judgment, the husband filed an Application in a Proceeding on 4 April 2023 seeking the following orders:
1. That within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on an indemnity basis being indemnity costs referrable to the costs and disbursements paid by the Applicant to his lawyers York Law Family Law Specialists being an amount fixed in the sum of $118,578.49.
2.In the alternative to Order 1 hereof but without concession, within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on an indemnity basis as agreed or assessed and pay the same within 14 days of any agreement or assessment.
3. That in the alternate to Orders 1 and 2 hereof but without concession, within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on a solicitor/client basis with such costs to be fixed in the sum of $88,933.86.
4.That in the alternate to Orders 1, 2 and 3 hereof but without concession, within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on a solicitor/client basis as agreed or assessed and pay the same within 14 days of any agreement or assessment.
5. That in the alternate to Orders 1, 2, 3 and 4 hereof but without concession, within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on a party/party basis with such costs to be fixed in the sum of $77,076.01.
6. That in the alternate to Orders 1, 2, 3, 4 and 5 hereof but without concession, within 14 days from the date of these Orders the Respondent pay the Applicant's costs of and incidental to these proceedings on a party/party basis as agreed or assessed and pay the same within 14 days of any agreement or assessment.
7. That the Respondent pay the Applicant's costs of and incidental to this Costs Application
In her Response filed on 18 April 2023, the wife sought:
1. That the Applicant husband’s Application be dismissed.
2. That as between the Applicant husband and Respondent wife there be no Order as to costs.
I also note that the wife changed her legal representation on 12 April 2023, and she was represented for the purposes of this costs application.
THE LAW
The relevant principles with respect to costs are well settled, and have been discussed by the Full Court in Parke & The Estate of the Late A Parke (2016) FLC 93-748, followed in Atkins & Hunt (Costs) [2017] FamCAFC 131. The Court has a wide discretion, which is to be exercised judicially.
In proceedings to which the Family Law Act 1975 (Cth) (“the Act”) applies, the starting point is that each party shall bear his or her own costs: s 117(1). If, however, the Court is of the opinion that there are justifying circumstances, the Court may make such order as to costs and security for costs as the Court considers just: s 117(2). In Re JJT; Ex parte Victoria Legal Aid (1998) 1998 CLR 184, the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) referred to costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (see Hayne J at [98]).
When considering what, if any, order for costs should be made, the Court must have regard to the factors set out in s 117:
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
It is well settled that no one factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient; Prantage & Prantage (Costs) [2014] FamCA 850 at [12] (“Prantage”); Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish (2005) 33 Fam LR 123 at [41].
The Full Court in Moorcroft & Moorcroft (2020) 60 Fam LR 361 confirmed that indemnity costs are awarded only in exceptional circumstances (see also Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No 2) (2010) FLC 93-435).
The first question is whether the husband has established any circumstances which justify departing from the position that each party pay their own costs, and the making of a costs order in his favour. The second question is whether, if there are circumstances justifying a costs order, the wife should pay the husband’s costs on a basis, such as indemnity costs or as a fixed sum, other than costs as agreed or assessed on a party and party basis.
DISCUSSION
Section 117(2A)(a) – the financial circumstances of the parties
As a result of the final orders made, each of the parties will retain their assets and liabilities in their respective names.
During the final hearing, I granted the wife to rely upon a Case Outline filed on 6 March 2023. This outline noted that in 2021, the wife received an inheritance from her late mother in the sum of $180,844.15. Her counsel made submissions during the final hearing that she holds approximately $140,000 in a bank account.
There was also evidence that the wife continues to support the parties’ child, who suffers from a range of medical conditions such as Autism Spectrum Disorder and Attention Deficit Hyperactivity Disorder. She pays rent of $450 per week and childcare costs of $102 per week.
The husband provided evidence in his Financial Statement filed on 1 February 2023 that his weekly income was $1,884. He holds assets worth $398,031 excluding his superannuation, and has liabilities totalling $246,112. The final orders provided for each party to retain their assets and liabilities.
I am unable to conclude on the evidence that the husband is in a slightly better financial position than the wife.
Section 117(2A)(c) – the conduct of the parties; and
Section 117(2A)(d) – whether the proceedings were necessitated by a party’s failure to comply with previous Court orders
The husband argued that the conduct of the wife should justify an award of costs in his favour. It was suggested that her conduct had resulted in the husband incurring legal fees that should have been avoided.
On 24 November 2021, the matter was listed before a senior judicial registrar for a Conciliation Conference, however did not proceed due to a failure by the wife or her lawyers to appear. The matter was subsequently adjourned to 7 December 2021, where final consent orders were made in respect of the parenting dispute. The property dispute remained on foot, the conference having been adjourned again for the wife to issue specific questions to the husband. He gave evidence that no questions were issued.
The husband also gave evidence of the wife’s conduct during the lead-up to this Conciliation Conference. I made orders on 25 August 2021 referring the matter to the conference, and for the parties to file and serve a consolidated trial affidavit by 15 October 2021. The husband complied, whilst the wife indicated on the same date that she would be in a position to exchange documents by way of service early the following week. The wife did not file her material until 10 November 2021.
The husband also relied upon the wife’s conduct during preparation for final hearing, namely her failure to comply with directions issued by me on 7 November 2022. I refer to the background of the matter as set out in Cavendish at [5]–[7] and [11]. It should be noted that the wife failed to file and serve her updated Response, trial affidavit, and case outlines within the time frames set by the orders.
The husband further contended that the wife had failed to uphold her duties of full and frank disclosure pursuant to the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). Rule 6.01 imposes an absolute duty on a party to give full and frank disclosure “of all information relevant to the proceeding, in a timely manner”. Rule 6.06 then sets out in detail the duty of disclosure in financial proceedings. The husband annexed a series of letters (Annexure 20) containing requests for disclosure.
Up to the date of the final hearing, the wife had failed to provide any documents in relation to the inheritance she received from her late mother’s estate. Whilst it was submitted that she received $181,844.15, no documents were provided in support.
The husband contended that the wife failed to comply with her obligations under the Rules in relation to full and frank financial disclosure, failed to comply with trial directions, contended disingenuously that the husband had failed to make certain disclosures, and failed to attend in settlement negotiations and mediations in good faith. I generally accept these submissions.
I also noted in the substantive judgment that the husband scrupulously adhered to the directions for final hearing, while the wife did not. I also noted the wife filed a trial affidavit two days before the commencement of the final hearing, but gave no evidence in that affidavit explaining her non-compliance with directions. I noted that her counsel made submissions to the effect that the wife’s solicitor on the record was responsible for this, but while this may be true, there was no basis to lay this at the feet of the husband. The responsibility of the wife’s solicitor for defalcations was raised by the wife in her affidavit, filed in response to the husband’s costs application, but no application was made seeking that any costs order in the husband’s favour be made against her solicitor personally.
Section 117(2A)(e) – whether either party has been wholly unsuccessful
There is no question that the wife was wholly unsuccessful in these proceedings: Cavendish at [45].
Section 117(2A)(f) – offers in writing
The husband referred to a number of offers of settlement made throughout the proceedings.
On 16 May 2017, the husband offered for the wife to return a piece of jewellery which she held in her possession, which was received from the husband’s late mother’s estate, and for the parties to otherwise retain their assets and liabilities. The husband ultimately did not press an order for the wife to return the jewellery, although she did undertake at the final hearing to pass it onto their daughter. The orders made at final hearing otherwise provided for each party to retain their respective assets and liabilities.
On 14 June 2017, the husband offered to pay the wife $50,000, for the return of the jewellery, and for the parties to otherwise retain their assets and liabilities. On 6 February 2018, this offer was increased to $120,000. Both of these offers were rejected.
On 18 June 2019, the husband made a further offer to pay the wife $120,000, and for the parties to otherwise retain their assets and liabilities. This represented a division of 64.4 per cent of the pool in the wife’s favour.
On 25 March 2022, the wife had made an offer for the husband to pay her the sum of $200,000. In response, he counter-offered the sum of $60,000 upon the sale of a property owned by the Cavendish Family Trust in City F. He claimed that subsequently he increased this offer to $85,000, but did not provide evidence as to when he did so.
On 13 January 2023, the husband made an offer for the Cavendish Family Trust to be joined as a party, the City F property to be sold, the wife to receive the sum of $140,000, for the wife to return the jewellery, and for the parties to retain their assets and liabilities.
The husband made a final offer on 6 March 2023 for the wife to receive $20,000, to return the jewellery, and for the parties to otherwise retain their assets and liabilities.
As can be seen, the outcome obtained by the wife at final hearing was worse than what would have been achieved had she accepted any offer made after 16 May 2017.
CONCLUSION ON JUSTIFYING CIRCUMSTANCES
I am satisfied that the wife’s total lack of success and her failure to accept any offer made by the husband justify an order for costs in his favour. I do not accept the wife’s arguments that her financial position neutralises such justifying circumstances. She did not in her evidence or submissions provide a sound reason for why a costs order should not be made. The question remains the basis on which costs should be awarded.
INDEMNITY COSTS
The husband argues that the circumstances are such that the Court should award indemnity costs in his favour.
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard, rare, and requires something exceptional: Harris & Dewell (No 2) (2018) FLC 93-863, where the Full Court said:
23. In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24. That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25. The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
(Footnotes omitted)
The husband relied on Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 in support of his argument that some “special or unusual feature” existed in the matter to “justify the Court departing from the ordinary practice” at [16]. He further referred to Munday and Bowman (1997) FLC 92-784 at 84,660, where Holden CJ set out five circumstances in which an award of indemnity costs might be justified:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts: see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd.
(c) Evidence of particular misconduct causing loss of time to the court and to other parties: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported).
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
The husband also relied upon the conduct of the wife, described above, and her refusal to accept offers of settlement as part his basis for seeking indemnity costs.
CONCLUSION
I have found that there are circumstances justifying a costs order in the husband’s favour.
The submissions of the husband pressed two alternatives either indemnity costs or costs in a sum quantified by the Court on a party and party basis. He did not seek costs as assessed or agreed.
The husband gave evidence that his total costs and disbursements totalled $224,944.38, for both parenting and property matters. Parenting resolved by consent on 7 December 2021, and the husband estimated that 40 per cent of his costs up to 7 December 2021 were expended on the property dispute. Having regard to this fact, the total fees and disbursements he claimed were $118,578.49 on an indemnity basis. Alternatively, he quantified his costs on a party and party basis at $77,076.01.
The husband also sought the costs of the present application, which he argued should be fixed in the amount of $6,600.
By February 2018 the husband had offered the wife $120,000 in cash. The wife properly advised should have accepted this offer or any of the husband’s later offers. She did not provide any persuasive evidence why it was reasonable to refuse this offer or other later offers of the husband. This combined with the extraordinarily lax approach to complying with directions and preparing for final hearing would justify indemnity costs after February 2018, not to punish the wife but compensate the husband.
The difficulty is that the evidence of the husband does not permit the Court to accurately quantify costs on an indemnity basis from any particular date, and at a figure clearly referrable to the financial issues, excluding parenting issues. As pointed out, the husband provided a percentage estimate. It is not possible to know the accurate figure for indemnity costs for the financial issues,
It is in the interests of both parties for all costs arguments to be brought to an end by this judgment.
Accordingly, I will exercise the Court’s discretion to make an order in a fixed sum in favour of the husband, taking account of the figures he has provided. This will not be full indemnification but I infer will provide compensation at a greater level than a party and party assessment. I set the fixed amount of costs to be paid by the wife to the husband at $85,000.
The husband should also receive the costs of his Applications for Costs fixed in the sum of $5,000, noting he claimed $6,000.
In light of the wife’s financial position I will allow 60 days for these amounts to be paid.
I have also taken account of the possibility that the wife may pursue any proper remedy against her former solicitors in relation to her costs liability, as she may be advised.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 5 July 2023
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