Chen & Chen (No 2)
[2024] FedCFamC1A 125
•31 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Chen & Chen (No 2) [2024] FedCFamC1A 125
Appeal from: Chen & Chen [2024] FedCFamC1F 48 Appeal number: NAA 62 of 2024 File number: MLC 5805 of 2016 Judgment of: AUSTIN, KARI & CHRISTIE JJ Date of judgment: 31 July 2024 Catchwords: FAMILY LAW – APPEAL – COSTS – Written submissions on the issue of costs – Whether the applicant should pay the first and second respondents’ (“the respondents”) costs – Where the application for leave to appeal was wholly unsuccessful and was dismissed – Where the respondents conduct of the appellate proceeding was lamentably poor – Where the applicant’s financial circumstances compare unfavourably to the respondents – Application dismissed. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.17, 13.54
Number of paragraphs: 22 Date of last submission: 22 July 2024 Date of hearing: Determined in chambers on the papers Solicitor for the Applicant: Jano Family Law Solicitor for the First and Second Respondents: KHQ Lawyers The Third Respondent: Litigant in person (did not participate) ORDERS
NAA 62 of 2024
MLC 5805 of 2016FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR CHEN
Applicant
AND: MR OO AND MR UU IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF QUEN PTY LTD (IN LIQUIDATION), E PTY LTD (IN LIQUIDATION) AND F PTY LTD (IN LIQUIDATION)
First Respondent
MR OO AND MR UU IN THEIR CAPACITY AS JOINT AND SEVERAL RECIEVERS OF THE ASSETS AND UNDERTAKING OF THE QUEN FAMILY DISCRETIONARY TRUST, E FAMILY TRUST, AND F FAMILY TRUST
Second Respondent
MS QUEN
Third Respondent
ORDER MADE BY:
AUSTIN, KARI & CHRISTIE JJ
DATE OF ORDER:
31 JULY 2024
THE COURT ORDERS THAT:
1.The first and second respondents’ application against the applicant for their costs of and incidental to the application for leave to appeal is dismissed.
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).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chen & Chen (No 2) has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
AUSTIN, KARI & CHRISTIE JJ:
On 8 July 2024, the Full Court dismissed an application for leave to appeal and made procedural orders enabling any costs application to be determined on the papers in chambers.
The first and second respondents (“the respondents”) filed written submissions on 15 July 2024 seeking costs against the applicant, preferably on an indemnity basis in the total sum of $43,744.89, but otherwise on a party/party basis assessed at $25,000.
The applicant filed written submissions on 22 July 2024 proposing that each party bear their own costs, though he was willing to pay the sum of $744.99 to recompense the respondents for the cost of transcript for three hearings held in April, May and June 2024. However, none of those hearings concerned either the procedural management or the substantive hearing of the underlying application for leave to appeal, so those transcripts were irrelevant to the appellate proceeding. The appeal registrar held a directions hearing on 22 April 2024 and the application for leave to appeal was heard by the Full Court on 26 June 2024.
The alternate applications brought by the respondents are dismissed for the following reasons.
Legal principles
The respondents are parties to both the original and appellate litigation, albeit in their professional capacity as liquidators and receivers.
As parties to the application for leave to appeal, they are bound by the orthodox principle that they should bear their own costs of the application (s 117(1) of the Family Law Act 1975 (Cth) (“the Act”)). The Court may exercise discretion to make costs orders between parties (s 117(2)), but only after the consideration of mandatory factors (s 117(2A)).
Consideration
The respondents relied upon these factors to justify their entitlement to costs:
(a)they were required to respond to the application for leave to appeal, they informed the applicant the application had no real prospects of success, they sought its dismissal, it was dismissed, and so it was “wholly unsuccessful” (s 117(2A)(e) and s 117(2A)(g)); and
(b)they made two offers to settle the application for leave to appeal, which the applicant ignored and thereby failed to accept (s 117(2A)(f)).
Those factors, if engaged, might warrant a costs order in the respondents’ favour, but the respondents did not attempt to explain how such factors, which could justify a costs order simpliciter, should also constitute the extraordinary circumstances necessary to justify an indemnity costs order.
It should be acknowledged the application for leave to appeal was certainly wholly unsuccessful, but that is only one consideration which favours the respondents. There are others which do not.
We do not accept the respondents were obliged to respond to the application for leave to appeal. They could have filed a Submitting Notice if they were so confident in the outcome and thereby saved all their costs. As it transpired, the respondents were of no assistance at all in the disposition of the application for leave to appeal. They hindered rather than helped.
First, they challenged the applicant’s standing to prosecute the application for leave to appeal, which challenge they withdrew (at [18]–[23]).
Secondly, they filed a Notice of Contention, which they abandoned during the hearing (at [23]).
Thirdly, they filed an application to adduce further evidence in the application for leave to appeal, which they abandoned during the hearing (at [23]).
Fourthly, they incorrectly submitted the receivers’ appointment was governed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) (at [36] and [42]–[45]).
Fifthly, after successfully defending the appealed orders, the respondents foreshadowed their intended application to then vary the orders by resort to either the slip rule or by seeking leave to belatedly bring a Notice of Cross Appeal, which applications they then abandoned during the hearing (at [62]).
Lastly, they filed their schedule of costs out of time and could not quantify their costs application at the hearing when pressed, which was why orders had to be made to adjourn the consideration of their costs application (at [63]).
Nor should it escape mention that the respondents asserted their indemnity costs at the hearing were estimated at $75,000, which is noteworthy for two reasons. First, they could not explain how such an extravagant sum could have been expended on an application for leave to appeal in which they filed a modest Summary of Argument and appeared at a hearing which ended within a couple of hours. Secondly, their claim for indemnity costs is now quantified at $43,744.89 and yet no satisfactory attempt was made to explain the large mathematical discrepancy with the figure initially claimed at the hearing, supposedly in conformity with the professional duty of responsible advocacy. Even the respondents’ alternate assessment of their party/party costs at $25,000 is unreasonably disproportionate (r 12.17(3) of the Rules).
For those reasons, the respondents’ conduct of the application for leave to appeal was lamentably poor (s 117(2A)(c)).
The two offers of settlement the respondents made to the applicant were effectively identical. They offered to bear their own costs if the applicant withdrew the application for leave to appeal. But they were not particularly attractive offers of compromise for two reasons: first, because the applicant could prosecute the application for leave to appeal and still enjoy the usual protection against the respondents’ costs afforded by s117(1) of the Act, subject to them successfully applying to invoke s 117(2) of the Act upon dismissal of the application; and secondly, the offers did not attempt to quantify the respondents’ costs of the application for leave to appeal which would be saved by the applicant by avoidance of any adverse costs order. The offers contained no real incentive for the applicant to capitulate.
The applicant was self-represented in the appellate proceeding and it is understandable why he sought to challenge the appealed orders. As the Full Court observed in the substantive reasons for judgment, the primary judge made factual errors (at [12]–[17]) and engaged in a lengthy discussion about jurisdiction which led nowhere (at [34]–[38]), but did inspire the applicant to think he had grounds for relief (at [38]).
The applicant represented himself both in the appellate and original proceedings. His costs submissions were prepared by his former solicitors on a pro bono basis. These factors support the conclusion that the applicant was without the means to engage lawyers. His financial circumstances compare unfavourably to the financial resources of the respondents, who are ready and willing to expend large sums contesting this litigation, drawn from the assets of the corporations and trusts under their control (s 117(2A)(a)).
We are not satisfied the respondents have established a basis for any costs order, let alone one calculated on an indemnity basis, which makes it unnecessary to discuss the respondents’ failure to comply with r 13.54(3) of the Rules. The maintenance of their claim for indemnity costs without any ostensibly valid basis to do so and in breach of the Rules manifests an unduly cavalier attitude to the conduct of this litigation.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Austin, Kari & Christie . Associate:
Dated: 31 July 2024
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