CHARLES & CHARLES
[2014] FamCA 357
•4 June 2014
FAMILY COURT OF AUSTRALIA
| CHARLES & CHARLES | [2014] FamCA 357 |
| FAMILY LAW – COSTS – Application for costs on a solicitor-client basis or on an indemnity basis in respect of various periods during substantive proceedings – Where both parties conducted the litigation in an adversarial manner – Where the wife made a number of offers of settlement but where the Court finds there was no imprudence on the husband’s part in not responding to those offers – Where neither party is considered wholly unsuccessful in the proceedings – Application dismissed – No order for costs to be made in respect of the proceedings |
| Family Law Act 1975 (Cth) ss 117, 90G Family Law Rules 2004 (Cth) rr 19.18 |
| Charles & Charles [2013] FamCA 842 Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536 Collins & Collins (1985) FLC 91-603 D & D (Costs) (No. 2) [2010] FamCAFC 64 Fennessy & Gregorian [2009] FamCAFC 44 Joyce & Fante [2013] FamCAFC 141 Kohan & Kohan (1993) FLC 92-340 Limousin & Limousin [2007] FamCAFC 1178 PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 Penfold v Penfold (1980) 144 CLR 311 Re Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin (1997) CLR 622 Robinson and Higginbotham (1991) FLC 92-209 Pennisi & Pennisi (1997) FLC 92-774 Browne & Green (2002) FLC 93–115 Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 |
| APPLICANT: | Ms Charles |
| RESPONDENT: | Mr Charles |
| FILE NUMBER: | SYC | 5072 | of | 2008 |
| DATE DELIVERED: | 4 June 2014 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 26 May 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr White |
| SOLICITOR FOR THE APPLICANT: | Michael Conley Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney SC |
| SOLICITOR FOR THE RESPONDENT: | Meyer Partners Family Lawyers |
Orders
That the wife’s application for costs filed 27 November 2013 be dismissed.
That there be no order as to costs in respect of the said application.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Charles & Charles has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: SYC 5072 of 2008
| Ms Charles |
Applicant
And
| Mr Charles |
Respondent
REASONS FOR JUDGMENT
Final Orders were made as to property between the husband and wife on the 30 October 2013 (Charles & Charles [2013] FamCA 842).
The wife now makes application for an order that the husband pay her costs of the proceedings on the basis of the costs agreement between the wife and her solicitors or on an indemnity basis for various discrete periods, the relevance of which will become apparent. The husband seeks the dismissal of that application or, in the alternative, if there is any order as to costs, it be on a party/party basis.
At the outset, it was made clear to the parties that the Court would not engage in an assessment of costs if any order was made, with such assessment to be a matter for the usual process.
Costs
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.
That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2) of that section, which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just. As such a broad discretion reposes in the Court: Collins & Collins (1985) FLC 91-603.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: see Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in s 117(2A). They relevantly, in these proceedings, relate to the following:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party has legal aid and the terms of any grant of aid;
(c) the conduct of the parties to the proceedings, including in relation to the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answers, 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.
There is nothing to prevent any one factor being the sole determinant for an order for costs: see PBF as Child Representative for AF (Legal Aid Commissioner of Tasmania) & TRF & LKL (2005) 33 Fam LR 123.
Indemnity Costs
The application before the Court is an application for the husband to pay the wife’s costs in respect of certain periods during the substantive proceedings on an indemnity basis, or such other order as the Court thinks fit.
It is usual for the Court to make an order for costs on a party/party basis.
Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly rule 19.18, provides for the method of calculations of costs. That rule provides as follows:
(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);
(b)to be calculated in accordance with the method stated in the order; or
(c)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
Rule 19.18 further provides that:
(3) In making an order under subrule (1), 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.
The Court has jurisdiction in its discretion to make an order for costs on an indemnity basis and the purpose of such an award is to more fully or even wholly repay to a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings.
The category of cases in which an award of an indemnity costs order may be appropriate are not closed and the Full Court of the Family Court observed in Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 at [31]:
… It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and 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 order is sought. …
More recently, the Full Court has considered indemnity costs in Joyce & Fante [2013] FamCAFC 141, Limousin & Limousin [2007] FamCAFC 1178, Fennessy & Gregorian [2009] FamCAFC 44 and D & D (Costs) (No. 2) [2010] FamCAFC 64.
Otherwise, the principles underlying an award for indemnity costs have been classically summarised by Sheppard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536 where his Honour, in summary, said at [24]:
…
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on a party and party basis. …
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. …
4. In consequence of the settled practice which exists, the Court ought not usually make an order for 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. …
Sheppard J made observations as to some of the circumstances which may warrant the exercise of the discretion to aware indemnity costs and they included:
a)false and irrelevant allegations of fraud;
b)misconduct that causes a loss of time to the Court and other parties;
c)where the proceedings were commenced or continued for an ulterior motive;
d)the undue prolongation of a case on groundless contentions; and
e)wilful disregard of known facts and clearly established law.
The background of the matter is relevantly set out in the Court’s primary judgment.
Issues for Determination & Discussion
The question for determination is whether circumstances are such that departure from the normal rule as to costs found in s 117 of the Act is justified.
The relevant considerations are:
a)The parties’ financial circumstances:
As a consequence of property Orders both parties are possessed of significant property. The wife contends that, by reason of her costs being in the vicinity of $900,000, and being a significant impost of her ultimate verdict there will be a further disparity in the financial circumstances of the parties justifying an order for costs.
In Kohan & Kohan (1993) FLC 92-340 the Full Court recognised that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said, at 79,611:
… it is fundamental to the exercise of that 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 s117(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.
The Full Court in Kohan sounded a warning to parties as follows:
When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.
The sheer quantum of the wife’s costs, without more, is not an appropriate consideration.
The husband contends that any order for costs will result in a further diminution of his asset position where he retained assets of $2,660,000 and require him to realise his business interests. It is simply a matter of logic that any order for costs will diminish the unsuccessful party’s financial position. It is a matter for that party to resolve how any order for costs is to be met.
b)Legal aid:
This is not a relevant consideration.
c)Conduct in relation to the proceedings:
The wife commenced proceedings in October 2009 seeking as a threshold order and order setting aside the binding financial agreement entered into by the parties previously. In brief, the wife initially asserted non-disclosure by the husband and later, in November 2011, that the agreement did not comply with s 90G of the Act.
On 8 November 2011 the wife’s solicitors wrote to the husband’s solicitors, as it were, alerting them to the basis of her claims in relation setting aside the agreement and, by inference, seeking consent to the agreement being set aside.
On 23 May 2013 the wife’s solicitors again invited the husband to consider his position in relation to the agreement, warning that absent his consent to setting the agreement aside, there may be consequences in terms of costs.
On 23 August 2013, shortly before the hearing was to commence, the husband communicated his consent to the agreement being set aside and be declared non-binding pursuant to s 90G(1) of the Act. By this time the wife had prepared her case including the s 90G issue for trial.
At trial the husband’s failure in terms of fundamental disclosure prior to the financial agreement being signed was clear and referred to in the primary Judgment at [50] - [51]. Nevertheless, the agreement was by consent set aside under s 90G(1)(b) of the Act.
Otherwise, both parties make allegation and complaint about the conduct of the other in terms of the conduct of the proceedings. It is apparent that the matter has been conducted in the full spirit of the adversarial system by both parties.
d)Non-compliance with Court orders:
This is not contended to be a relevant consideration.
e)Whether a party was wholly unsuccessful:
The wife contends that in relation to the s 90G issue the husband, notwithstanding his late consent to the order, was wholly unsuccessful. She asserts that, notwithstanding there was no hearing on the merits, the husband acted unreasonably in providing his consent at the last moment, having put the wife to the expense of preparing that part of the trial. Such circumstances can a relevant consideration: Re Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin (1997) CLR 622.
The husband complains of the wife’s failure to properly particularise the basis of her application to set aside the financial agreement. Nevertheless, the wife was represented at the time and it may be a matter for another court in another place to determine her loss occasioned by the need to conduct proceedings to set aside the agreement.
Neither party was wholly unsuccessful in the s 79 proceedings.
f)Any offer of settlement:
The public policy reason behind the encouragement of the making of offers of settlement during proceedings is that it is beneficial to both of the parties, the Court and the public at large if people are able to resolve their disputes themselves without the need for litigation.
As was observed by Nygh J in Robinson and Higginbotham (1991) FLC 92-209 at 78,417, in relation to offers:
… it is quite clear that the purpose of that provision is to ensure that offers to settle, if made seriously, are considered seriously, to ensure that the cost of litigation is avoided, the workload of this Court is lightened, and one other consideration is certainly that a party with greater wealth is not placed in a position whereby he or she can wear out the other by simple attrition. …
In Pennisi & Pennisi (1997) FLC 92-774, referring to s117(2A)(f), the Full Court, said at 84,547:
… Offers must be seen in the context of the case and the extent of the offeree's knowledge of the parties' financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties' financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.
In Browne & Green (2002) FLC 93–115 the Full Court commented at 89,163:
… The failure to heed a reasonable offer in circumstances where there is adequate knowledge of the parties at the time the offer is made to give it a proper consideration, is something to which very significant weight indeed ought normally be given. …
The wife made an offer to settle by letter of the 18 May 2012. The draft balance sheet included in that correspondence was not free from controversy and bears little resemblance to the ultimate pool for division at trial. The wife does not contend how the ultimate Orders relate to the “offer” or on what basis the husband could have appropriately considered the offer having regard to the significant issues for determination at trial. Any imprudence on behalf of the husband in not responding to the offer is not established.
The wife made a further offer on the 13 May 2013 in terms of about 35 per cent of the overall net asset pool plus a payment of cash and transfer of a real estate property to her. The offer was not acceptable simpliciter in its terms. It required an enquiry as to the actual pool available for division and, by inference, a counter-proposal by the husband as to the nature of specific orders he would seek to implement such a settlement. Once an offer is made, by its very terms, it informs the orders to be made. It is clear that the balance sheet she relied on for the offer was, again, not free from controversy and evidenced significant issues as to value, the composition of the pool and omitted reference to liabilities of over $1,000,000. The husband did not respond to the offer. Any imprudence on behalf of the husband in not responding to the offer is not established.
The wife made a third offer following mediation in July 2013. By this stage the draft updated single expert accounting report was available. The wife’s offer involved transfer of the property at Suburb L unencumbered to the wife from the family trust, payment of a dividend of $750,000 from Y Pty Ltd to the family trust and a trust distribution of $750,000 to the wife’s solicitors with default enforcement provisions and the husband to indemnify the wife from any taxation liability, together with superannuation splitting orders in favour of the wife totalling about $540,000. The underlying premise of the offer, being the pool asserted by the wife, was significantly dissimilar to the pool found at trial.
The rationale for the way in which the wife’s offer was constituted was not explained to the husband in the covering letter of 31 July 2013 and the final Orders made were on a different basis, save for a superannuation splitting Order of $250,000. Any imprudence on behalf of the husband in not responding to the offer is not established.
g)Any other relevant matter:
There is no other relevant matter.
The Court is not persuaded, for the reasons set out above, that there are circumstances justifying a departure from the general rule as to each party paying their own costs.
The wife’s application for costs will be dismissed and no order will be made as to costs of the present application.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 4 June 2014.
Legal Associate:
Date: 4 June 2014
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Costs
-
Appeal
0
7
2