Chen and Chen & Ors (No. 2)
[2020] FamCA 620
•31 July 2020
FAMILY COURT OF AUSTRALIA
| CHEN & CHEN AND ORS (NO. 2) | [2020] FamCA 620 |
| FAMILY LAW – COSTS – party unsuccessfully seeking a freezing order – party/party costs on scale sought against unsuccessful party – s 117(2A)(e) enlivened – relevant authorities considered – costs order made. |
| Family Law Act 1975 (Cth) ss 117(1), 117(2), 117(2A) Family Law Rules 2004 (Cth) r 19.18(1) |
| Andrews v Barnes (1888) 39 Ch D 133 Goodridge & Beadle (No. 2) [2019] FamCA 786 In the Marriage of Hogan (1986) 10 Fam LR 681 |
| APPLICANT: | Ms Chen |
| FIRST RESPONDENT: | Mr Chen |
| SECOND RESPONDENT: | Ms Quen |
| THIRD RESPONDENT: | C Pty Ltd (ACN…) |
| FOURTH RESPONDENT: | Quen Pty Ltd (ACN…) |
| FIFTH RESPONDENT: | E Pty Ltd (ACN…) |
| SIXTH RESPONDENT: | Company F (ACN…) |
| SEVENTH RESPONDENT: | B Pty Ltd (ACN…) |
| EIGHTH RESPONDENT: | Mr A Chen |
| NINETH RESPONDENT: | Mr B Chen |
| TENTH RESPONDENT: | Mr C Chen |
| FILE NUMBER: | MLC | 5805 | of | 2016 |
| DATE DELIVERED: | 31 July 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Wilson J |
| HEARING DATE: | 24 July 2020 |
| LAST DATE OF WRITTEN SUBMISSIONS: | 28 July 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | No Appearance |
| SOLICITOR FOR THE APPLICANT: | No Appearance |
| COUNSEL FOR THE FIRST RESPONDENT: | No Appearance |
| SOLICITOR FOR THE FIRST RESPONDENT: | Jano Family Law |
| COUNSEL FOR THE SECOND RESPONDENT: | No Appearance |
| SOLICITOR FOR THE SECOND RESPONDENT: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE THIRD RESPONDENT: | No Appearance |
| SOLICITOR FOR THE THIRD RESPONDENT: | No Appearance |
| COUNSEL FOR THE FOURTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE FOURTH RESPONDENT: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE FIFTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE FIFTH RESPONDENT: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE SIXTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE SIXTH RESPONDENT: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE SEVENTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE SEVENTH RESPONDENT: | No Appearance |
| COUNSEL FOR THE EIGTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE EIGTH RESPONDENT: | No Appearance |
| COUNSEL FOR THE NINTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE NINTH RESPONDENT: | No Appearance |
| COUNSEL FOR THE TENTH RESPONDENT: | No Appearance |
| SOLICITOR FOR THE TENTH RESPONDENT: | No Appearance |
Orders
By 4pm on 30 August 2020 the first respondent must pay the second respondent’s costs on a party/party basis in the amount of $11,054.44.
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 Chen & Chen 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 MELBOURNE |
FILE NUMBER: MLC 5805 of 2016
| Ms Chen |
Applicant
And
| Mr Chen |
First Respondent
And
| Ms Quen |
Second Respondent
And
| C Pty Ltd (ACN…) |
Third Respondent
And
| Quen Pty Ltd (ACN…) |
Fourth Respondent
And
| E Pty Ltd (ACN…) |
Fifth Respondent
And
| Company F (ACN…) |
Sixth Respondent
And
| B Pty Ltd (ACN…) |
Seventh Respondent
And
| Mr A Chen |
Eighth Respondent
And
| Mr B Chen |
Ninth Respondent
And
| Mr C Chen |
Tenth Respondent
REASONS FOR JUDGMENT
Introduction
On 10 July 2020 the first respondent, Mr Chen, filed an urgent application seeking relief preventing the dissipation of assets by the second respondent, Ms Quen described by her assumed first name. He also sought further and better discovery. I heard the urgent application on 16 July 2020 and on 24 July 2020 delivered my reasons for judgment in Chen & Chen and Anor[1] dismissing the first respondent’s application. Upon delivering my reasons, Mr Marash, solicitor appearing for the second respondent sought costs against the first respondent on a lump sum party/party basis of $11,054.44.
[1] [2020] FamCA 602.
Synopsis
For the reasons that follow, the first respondent must pay the second respondent’s costs on a party/party basis in the fixed sum of $11,054.44.
Factual setting
Submissions of the second respondent
In his application Mr Marash sought his client’s costs in the amount of $11,054.44. On behalf of his client Mr Marash contended that –
a)at the hearing on 16 July 2020 Mr Glick QC foreshadowed an application for costs in the event the first respondent was unsuccessful in his application; and
b)indemnity costs were $16,500 but party/party costs were calculated on scale in the sum of $11,054.44.
On 16 July 2020 Mr Glick QC submitted that costs should be paid in the first instance by the first respondent. In support of his contentions Mr Marash relied on s 117(2A) of the Family Law Act.
Submissions of the first respondent
On 24 July 2020 Mr Janowski, appearing for the first respondent, opposed Mr Marash’s application. Mr Janowski requested time to prepare written submissions. I made the following order –
By 4pm on 29 July 2020 the first respondent must file and serve written submissions on the costs sought today by the second respondent, those costs being $11,054.44 assessed on a lump sum party/party basis.
On 28 July 2020 Mr Janowski filed amended written submissions. He advanced several propositions. They were –
a)the first respondent is relatively impecunious and has made an application for spousal maintenance and for a premature distribution of property (a “Barro” order) to pay his credit card debt and for litigation funding;
b)he has conducted himself as a fair and reasonable litigant;
c)his application was brought to protect his legitimate interests and the interests of all other parties to the litigation, which is within his rights, so he said;
d)a proper factual and legal foundation for his application existed based on evidence from an expert witness and his own summary of material;
e)a litigant being unable to prove his application should not be penalised by an award of costs;
f)the family law jurisdiction has traditionally been conservative in the making of such awards and should be reserved for the most extreme cases of misbehaviour by litigants, so he said; and
g)in his application he sought orders for further and better discovery that are yet to be determined and therefore it cannot be argued that the first respondent has been wholly unsuccessful in his application.
Mr Janowski submitted that an award of costs should not be made in this instance. However he said in the alternative if costs are awarded on a party/party basis they should be taxed.
Before going to my reasons for this decision, it is relevant to make certain preliminary observations about costs in litigation in this court, most of which I have mentioned in earlier costs judgments.[2]
[2] Dubois & Kusumo (No. 2) [2019] FamCA 641, Arkin & Blasberg (No. 2) [2019] FamCA 782, Goodridge & Beadle (No. 2) [2019] FamCA 786, Easom & Burhan (No. 2) [2020] FamCA 14, Harlen & Hellyar (No. 2) [2020] FamCA 413, Hearl & Digby [2020] FamCA 474, Guild & Stasiuk (No. 2) [2020] FamCA 564.
Costs in family law litigation
The starting point in any examination of an application for costs is s 117(1) of the Family Law Act. That section provides that each party should bear his or her own costs. Where circumstances justify the court so doing, the court is empowered to make such order as to costs as it considers just, as s 117(2) provides. The applicable rules of court mentioned in s 117(2) include r 19.18(1) of the Family Law Rules. Relevantly, that rule provides that the court possesses a discretion to make an order that costs be paid in a specific sum or on a particular basis, most usually on an indemnity basis of the type canvassed in Colgate Palmolive Co v Cussens Pty Ltd.[3]
[3] (1993) 46 FCR 225.
The decision of the High Court in Penfold v Penfold[4] was an early authoritative statement about the proper interpretation of s 117(2) of the Family Law Act. There, the plurality (Stephen, Mason, Aickin and Wilson JJ) held that it was erroneous for the Full Court of this court (Evatt CJ, Asche & Lusink JJ) to have concluded that an order can only be made under s 117(2) in a clear case. The High Court held that s 117(2) of the Family Law Act said no such thing. However, of s 117(2A) of the Family Law Act the High Court observed that“in the absence of some positive legislative indication, we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs”.
[4] (1980) 144 CLR 311.
Section 117(2A) is expressed in mandatory terms requiring a court when considering what order (if any) should be made under s 117(2) to have regard to seven matters. None of those seven matters is in and of itself determinative. However, the court must consider each matter in the seven alphabetical subsections of s 117(2A).
In view of the observations in In the Marriage of Wilson[5] direct evidence of the elements of s 117(2A) is required. In other words, in order for me to determine a question of costs – whether as to liability for or quantum of costs – direct evidence (rather than mere submission) must be before me about each matter canvassed in the alphabetical subsections of s 117(2A). Accordingly, I needed direct evidence of –
a)the financial circumstances of each party;
b)whether either was in receipt of legal aid;
c)the conduct of the parties in respect of the issues set out in s 117(2A)(c);
d)whether the litigation was necessitated by a failure to comply with a previous order;
e)whether any party had been wholly successful in the proceeding;
f)whether an offer of settlement had been made to settle the litigation and its terms; and
g)any other relevant matter.
[5] (1989) 13 Fam LR 205.
As with any costs order, any such order must be just as was held in In the Marriage of Hogan.[6] That is the situation irrespective of whether the costs order is interim or final.
[6] (1986) 10 Fam LR 681.
In Cachia & Hanes[7] the plurality of the High Court held that it has not been doubted since 1278 when the Statute of Gloucester of the United Kingdom introduced the notion of costs to the common law that costs are awarded as a partial indemnity for professional legal costs actually incurred in the conduct of litigation. In Knight & FP Special Assets Ltd[8] the High Court contrasted the common law position with respect to costs with the position in equity. I surveyed the learning on point in Goodridge & Beadle (No. 2).[9]
[7] (1994) 179 CLR 403.
[8] (1992) 174 CLR 178.
[9] [2019] FamCA 786.
Two early illustrations of equity’s treatment of costs warrant consideration. The first was Jones & Coxeter.[10] In that case the Lord Chancellor held that the award of costs was entirely discretionary and could be ordered at the time of the decree, unlike at common law where an order for costs had to await final judgment. The discretionary nature of costs in equity lay in its attachment to the conscience as Lord Hardwicke LC held in Corporation of Burford v Lenthall.[11] The second important early exposition on costs in equity was the decision in Andrews v Barnes.[12] There, the court held that equity’s power to order costs arose from the general and inherent power of the Lord Chancellor, the exercise of which carried with it a very wide discretion. Hence, in the Court of Chancery general orders for costs were made that included “full costs”, “good costs”, “double costs” and others.
[10] [1742] 26 ER 642.
[11] (1743) 2 Atk 551.
[12] (1888) 39 Ch D 133.
Since the enactment of the Family Law Act, a statutory regime has replaced equitable and common law concepts relating to costs in family law litigation. No narrow construction is to be applied to the provisions of s 117(1), 117(2) and 117(2A) of the Family Law Act, as was held in Re JJT; ex parte Victoria Legal Aid.[13] In that case Kirby J was of the view that whatever may have been the source of the court’s power to order costs, on and from the commencement of the Family Law Act the sole repository of the power to make a costs order has been the statute.
[13] (1998) 195 CLR 184, 201.
Ordinarily each party bears his or her (occasionally its) own costs in family law litigation. That is for the simple reason that s 117(1) of the Family Law Act makes provision for an order to that effect. Section 117(2) of the Family Law Act enables an order to be made pursuant to which one party is ordered to pay costs. Illustrations of costs orders under s 117(2) include indemnity costs orders or an order for costs to be paid on a particular basis or at a particular rate. Those orders are permissible yet in arriving at an order other than one to which s 117(1) applies, the court must undertake an examination and consideration of the elements in s 117(2A) of the Family Law Act.
As was held in PBF & TRF,[14] it is not necessary for more than one factor to exist under s 117(2A) before it is competent for a judge to enliven s 117(2A) so as to make a costs order that departs from the general principle set out in s 117(1) of each party bearing his or her own costs.
[14] (2005) 33 Fam LR 123.
Consideration
Let me now go to each relevant subparagraph of s 117(2A).
Subsection (2A)(a) – The financial circumstances of each of the parties to the proceedings
In his written submissions Mr Janowski argued that his client is relatively impecunious and has made an application for spousal maintenance and for a premature distribution of property (a “Barro” order) to pay his credit card debt and for litigation funding. That was a submission. No evidence of impecuniosity was adduced.
Subsection (2A)(b) – Whether any party to the proceedings is in receipt of assistance by way of legal aid
Neither party is in receipt of legal aid.
Subsection (2A)(c) – The conduct of the parties to the proceedings in relation to the proceedings
Mr Janowski submitted that the first respondent conducted himself as a fair and reasonable litigant might have done in bringing his application to protect his legitimate interests and the interests of all other parties to the litigation.
I do not agree.
Issues of discovery should have been addressed on 8 August 2020 and did not require the filing of an urgent application.
Mr Janowski submitted that his client sought to establish a proper factual and legal foundation for his application based on the best available and most contemporaneous evidence available to him adduced by an expert witness and his own summary of material.
I do not agree. The evidence of Mr W related to events two years ago.
In my reasons handed down 24 July 2020 I canvassed the basis of my rejection of the evidence of the financial records dating back to 2018, almost two years ago, and Mr W’s opinion in his report on a three month period from 1 July 2018 to 30 September 2018.
Subsection (2A)(d) – Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
This was not an application necessitated by a failure to comply with a previous order.
Subsection (2A)(e) – Whether any party to the proceedings has been wholly unsuccessful in the proceedings
While I recognise that part of the first respondent’s application for further and better discovery was adjourned to the next hearing on 8 August 2020 I do not agree that it is a sufficient ground for Mr Janowski to say Mr Marash’s client was otherwise than wholly successful. No orders were made for further and better discovery. Most importantly, the first respondent’s application for a freezing order failed.
I agree with Mr Marash’s submissions that the first respondent’s application in a case filed 10 July 2020 should not have been brought at all.
Basis of the costs order
Rule 19.18 of the Family Law Rules provides for the methods of calculating costs. These include, in r 19.18(1)(a), the court fixing a specific amount for costs or, in r 19.18(1)(b), an order for the costs to be assessed on a particular basis.
Recently, in Pierson & Romilly,[15] the Full Court said –
It is the policy of this Court to attempt to fix costs at the conclusion of the hearing in order to save the parties the cost, time and resources of a taxation, as well as to save the time of a Registrar in taxing the costs.
[15][2020] FamCAFC 91.
I am satisfied that the amount sought is appropriate. The costs awarded on a party/party basis should not be taxed. The scale rate is appropriate.
Having regard to each factor set out in s 117(2A) of the Family Law Act to which I have referred above, I am satisfied that an order should be made in accordance with Mr Marash’s application for the first respondent to pay Mr Marash’s clients’ costs on a party/party basis in the amount of $11,054.44, which sum has been calculated in accordance with the relevant scale.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 31 July 2020.
Associate:
Date: 31 July 2020
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