Cheni and Stiller (No 2)

[2016] FamCA 218

FAMILY COURT OF AUSTRALIA

CHENI & STILLER (NO 2) [2016] FamCA 218

FAMILY LAW – COSTS – Where application for contravention – Where application dismissed – Where application for costs on indemnity basis refused – Where appropriate to order costs on a party/ party basis.

Family Law Act 1975 (Cth) ss 117, 70NCB, 70NDC, 70NEB, 70NFB
Family Law Rules 2004 (Cth) rr 19.08, 19.08

Bele & Vaughan (Costs) [2012] FamCAFC 198
Cheni & Stiller [2016] FamCA 57
Hawkins & Roe [2012] FamCAFC 77
Kohan & Kohan (1993) FLC 92-340
Penfold v Penfold (1980) 144 CLR 311
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Mr Cheni

RESPONDENT: Ms Stiller

INDEPENDENT CHILDREN’S LAWYER: Shedden & Associates

FILE NUMBER: PAC 2819 of 2013

DATE DELIVERED: 8 April 2016

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 11 February 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Rosic

SOLICITOR FOR THE APPLICANT: Watts McCray Lawyers

SOLICITOR FOR THE RESPONDENT: Saldaneri & Associates

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Shedden & Associates

Orders

1. That the applicant father pay the respondent mother’s costs of and incidental to the contravention application filed by him on 4 September 2015 and of the present costs application, such costs to be paid on a party/party basis as agreed within one month from the date of this order or otherwise as assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Cheni & Stiller 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: PAC 2819  of 2013

Mr Cheni

Applicant

And

Ms Stiller

Respondent

REASONS FOR JUDGMENT

1. The application for determination is an application for costs by the respondent mother arising from the dismissal of a contravention application brought by the applicant father. The father’s contravention application filed on 4 September 2015 was dismissed by order on 11 February 2016: Cheni & Stiller [2016] FamCA 57.

2. On hearing of the father’s contravention application there was a finding that there was in effect no case for the mother to answer, the alleged contraventions being incapable of being contraventions of the orders.

Costs

1. 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.

2. That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), 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.

3. 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.

4. The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section as follows:

   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 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 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.

5. The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:

   17. With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:

   Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".

   Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v. Kent). Accordingly, 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.

   (Footnotes omitted)

   18. The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:

   … A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.

6. The mother seeks an order for costs on an indemnity basis in the sum of $16,764.

7. The mother’s application for costs arises by reason of the provisions of s 117 referred to above and the more particular provisions of s 70NCB of the Act.

8. Section 70NCB is relevant where the Court does not find that the respondent to a contravention application committed a contravention of the primary order. The Court may make an order that the person who brought the proceedings, that is the father in this matter, pay some or all of the costs of the respondent mother.

9. However the Court must consider making an order for costs where:

   a)The father had previously bought proceedings for contravention against the mother; and

   b)Whether on the most recent occasion on which the father brought proceedings by way of contravention the Court was not satisfied that the mother had committed a contravention or that the mother had committed a contravention but there was no order made varying a parenting order, by way of a compensatory time, costs under s 70NDC, an order under s 70NEB or an order under s 70NFB.

10. None of the matters set out in the previous paragraph are applicable to the present proceedings.

11. Other than the provisions of s 70NCB referred to above there is no reference in the section to any applicable principles in determining the exercise of the Court’s discretion contained in subsection (1).

12. Accordingly it is appropriate to look at the general principles that apply to costs as set out in s117 of the Act

13. As to the financial circumstances of the parties, the mother is currently on Centrelink benefits and at present the primary provider for her three young children aged seven, three and two. The father is presently assessed to pay child support of $400 per week but his current payments are $56 per week. The father’s appeal from the decision of the Child Support Agency was heard by a member of the Administrative Appeals Tribunal with a decision being handed down on 23 September 2015. That decision reveals that the father had been less than frank with the Tribunal in relation to his financial circumstances and had significant unexplained financial resources available to him.

14. Neither party in respect of the subject primary application is in receipt of a grant of legal aid.

15. There is no issue raised in relation to the parties’ “conduct of the proceedings”.

16. The mother seeks to rely on an offer of settlement. However the offer is subject to unrelated conditions and can have no weight in the present context.

17. The proceedings arose as a consequence of the allegations by the father that the mother had failed to comply with previous parenting orders. As referred to above the father’s application in that regard was dismissed. The father was thus wholly unsuccessful in the proceedings.

18. Otherwise the commencement of contravention proceedings should be given serious consideration. Appropriate forethought should be given to the asserted breaches and whether those breaches can be proved by admissible evidence such as to require the respondent to provide a response.

19. It was contended on behalf of the applicant father that the reservation of costs to the conclusion of other proceedings between the mother and father would be appropriate. The contravention application is a discrete application that has been heard and determined to finality. It is appropriate to determine the issue of costs promptly.

Indemnity Costs

1. It is usual for the Court to make an order for costs on a party/party basis.

2. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly r 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);

   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.

3. The rule further provides, in subparagraph (3), 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.

4. Rule 19.08(3) provides that 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. Save for the provision of a lump sum tax invoice for costs totalling $16,764 the mother has not provided such information to the Court.

5. 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.

6. In Kohan & Kohan (1993) FLC 92-340 at 79,611 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 a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said,

   … 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.

7. Then at 79,614 the Full Court said:

   The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O.38 r. 2, the provisions of O.38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client.

   O.38 r.7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No 2) [1983] 2 NSWLR 354; Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR 358 at 368 to 370.

   …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.

8. 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.

9. Strickland J in Bele & Vaughan (Costs) [2012] FamCAFC 198 at [26] to [28] on this issue encapsulated the relevant legal principles.

   26. A useful recent discussion of the question of indemnity costs is to be found in the decision of the Full Court in D & D (Costs) (No 2) (2010) FLC 93-435. There the Full Court reviewed extensively earlier authorities including Limousin v Limousin (Costs) (2008) 38 Fam LR 478 and Kohan and Kohan (1993) FLC 92-340, and also Sheppard J’s decision in Colgate-Palmolive Co & Another v  Cussons Pty Ltd (1993) 118 ALR 248.

   27.      The ordinary rule is that an order for costs is calculated on a party/party basis, and it emerges from the authorities referred to above that to depart from that rule exceptional circumstances need to be demonstrated.

   28.      As to what might constitute an exceptional circumstance, reference can be made to the oft-cited decision of Sheppard J in Colgate-Palmolive Co & Another v Cussons Pty Ltd where his Honour detailed circumstances that might qualify.  Usefully, Holden J in Munday v Bowman (1997) FLC 92-784 at 84,660 drew from the decision of Sheppard J the following examples:

   (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. (supra)).

   (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 (unreported, Federal Court, 3 May 1991)).

   (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 (unreported, Federal Court, 5 March 1993)).

   (e)      An imprudent refusal of an offer to compromise.

10. However the mother’s failure to comply with the requirements of r 19.08 is fatal to her application for indemnity costs notwithstanding that the application of the general principles as to indemnity costs would not have led to such an order being made in any event.

11. There are circumstances justifying a departure from the general rule that each party should pay their own costs as referred to above.

12. An order will be made that the father pay the mother’s costs of and incidental to the contravention application on a party/party basis as assessed or agreed.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 8 April 2016.

Associate: 

Date:  8 April 2016