Chifley and Ha
[2017] FamCA 683
•6 September 2017
FAMILY COURT OF AUSTRALIA
| CHIFLEY & HA | [2017] FamCA 683 |
| FAMILY LAW – PRACTICE AND PROCEDURE – JOINDER – Where the wife sought to join a third party to the proceedings on the basis of a claim pursuant to s 106B of the Family Law Act 1975 (Cth) – Where the wife failed to comply with the requirements in rule 6.03 of the Family Law Rules 2004 (Cth) – Where, at the commencement of the hearing, the wife abandoned her claim to join the third party. FAMILY LAW – COSTS – INDEMNITY COSTS – Application for costs in relation to the wife’s application to join a third party to the proceedings – Whether it is appropriate to order indemnity costs – Where the wife, in maintaining her application to join the third party, caused significant costs to the third party without a proper basis for so doing – Where if the matter had proceeded the wife would have been unsuccessful in her claim against the third party – Order that the wife pay the third party’s costs on an indemnity basis as agreed or assessed. |
| Family Law Act 1975 (Cth) s 106B, 117(2A) Family Law Rules 2004 (Cth) r 6.03 |
| Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) 81 ALR 397 Lenova & Lenova(Costs) [2011] FamCAFC 141 Prantage & Prantage (2013) FLC 93-544 Yunghanns & Yunghanns (2000) FLC 93‑029 |
| APPLICANT: | Ms Chifley |
| RESPONDENT: | Ms Ha |
| FILE NUMBER: | SYC | 4064 | of | 2013 |
| DATE DELIVERED: | 6 September 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | In chambers |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Finn Roache Lawyers |
SOLICITOR FOR THE RESPONDENT: | Carlisle Attorneys |
Orders
IT IS ORDERED
That the Respondent, Ms Ha pay the costs of the Applicant, Ms Chifley, in relation to the application filed by the Respondent, Ms Ha on 5 June 2017 seeking orders against the applicant, Ms Chifley including costs relating to legal advice from solicitor and counsel, correspondence and the attendance of counsel on 24 June 2017.
That such costs be paid on an indemnity basis, as assessed or agreed.
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 Chifley & Ha (Costs) 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 SYDNEY |
FILE NUMBER: SYC 4064 of 2013
| Ms Chifley |
Applicant
And
| Ms Ha |
Respondent
REASONS FOR JUDGMENT
Before the Court is an application for costs made by Ms Chifley in proceedings for property settlement between Ms Ha (“the wife”) and Mr Brumage (“the husband”). Those proceedings, which were commenced in 2013, were listed for hearing commencing on 24 July 2017.
Ms Chifley was a former de facto partner of the husband and a witness in the husband’s case.
Both Ms Chifley and the husband filed affidavits on 19 September 2016. The husband deposed that he and Ms Chifley were in a de facto relationship between 1989 and 2005.
They each deposed that, during their relationship, they jointly purchased business in Sydney (“the business”). The ownership of the business was held in equal shares by the husband’s family trust and Ms Chifley.
When the relationship between Ms Chifley and the husband broke down, the husband remained running the business. He was living in and running the business when he and the wife commenced co-habitation in April 2008.
Ms Chifley deposed that after they separated, and until such time as the husband purchased her interest in 2011, she remained involved in the running of the business, specifically managing the bookings remotely by computer.
Both the husband and Ms Chifley referred to the transaction whereby, in 2011, the husband paid Ms Chifley $270,000 for her interest in the business.
All of that information was available to the wife in September 2016.
There was no explanation for the wife’s ten month delay in seeking to join Ms Chifley as a respondent to the proceedings.
THE EVIDENCE
Ms Chifley relied on an affidavit sworn by her on 3 August 2017, an affidavit of her solicitor and written submissions.
The wife relied on an affidavit sworn by her on 18 August 2017, an affidavit by an employee of her solicitor annexing relevant correspondence, and written submissions.
THE PROCEEDINGS
Ms Chifley was a witness in the husband’s case by virtue of her affidavit sworn 19 September 2016.
She had also been served with two subpoenas for the production of documents, the first filed on 5 April 2017 and the second on 5 July 2017.
There was work done and correspondence entered into between Ms Chifley’s solicitors and the wife’s solicitors relating to the wife’s requirement that Ms Chifley attend for cross-examination in her capacity as the husband’s witness.
There was work done and correspondence entered into between Ms Chifley’s solicitors and the wife’s solicitors relating to the subpoenas and various difficulties in compliance with them, particularly having regard to the volume of the material sought to be produced.
The costs associated with that work are referable to Ms Chifley’s involvement as a witness in the husband’s case, not to her being joined as a party.
On 28 June 2017, the wife’s solicitor sent a letter to the solicitor for Ms Chifley enclosing a copy of the orders made by the Court on 20 February 2017, and a sealed Amended Initiating Application which had been filed on 5 June 2017. There was no explanation for the delay between the filing of the Amended Initiating Application and the service of that document upon Ms Chifley’s solicitor. The orders of 20 February 2017 made no reference to Ms Chifley and were relevant only in that they were the orders which fixed the hearing date commencing on 24 July 2017.
In the Amended Initiating Application, the wife sought the following order:
1A. An Order pursuant to section 106B of the Family Law Act 1975 (Cth), the disposition of funds made by [the husband] to or for the benefit of [Ms Chifley] in the sum of $270,000 be set aside and [Ms Chifley] remit and repay the sum of $270,000 to [the husband] or [the wife] in substitution for [the husband] as the Court may order.
No other documents were provided to Ms Chifley.
On 13 July 2017, Ms Chifley’s solicitors wrote a letter which was sent by email to the wife’s solicitors referring to the provisions of rule 6.03 of the Family Law Rules 2004 (Cth).
The provisions of rule 6.03 are set out below.
6.03 Adding a party
(2) A party may add another party after a case has started by amending the application or response to add the name of the party.
(3) A party who relies on subrule (2) must:
(a) file an affidavit setting out the facts relied on to support the addition of the new party, including a statement of the new party’s relationship (if any) to the other parties; and
(b) serve on the new party:
(i) a copy of the application, amended application, response or amended response; and
(ii) the affidavit mentioned in paragraph (a); and
(iii) any other relevant document filed in the case.
Ms Chifley’s solicitors, in the letter dated 13 July 2017, stated that no documents as mandated by rule 6.03 had been served upon Ms Chifley. The solicitor concluded, “The writer is hindered somewhat in that ironically because we do not have a client who is a ‘party’ we cannot get into the Commonwealth Courts Portal to determine whether such affidavit has been at least filed – certainly none has been served on [Ms Chifley].”
On behalf of the wife, it is submitted that the wife had no evidence in support of her application against Ms Chifley and that she was reliant on Ms Chifley’s evidence and the husband’s evidence and material produced on subpoena. Thus, it is submitted that the wife could not comply with rule 6.03. I do not accept that submission. It was incumbent on the wife to file an affidavit setting out the facts on which she relied in seeking orders against Ms Chifley. If she was not in possession of any facts, the application should not have been filed. Further, it must have been apparent that “any other relevant document filed in the case” included the whole of the affidavit material filed by both the wife and the husband in their respective cases. No attempt was made to provide Ms Chifley with any of that material.
On 17 July 2017, the wife’s solicitors wrote to Ms Chifley’s solicitors stating, inter alia:
With regard to your commentary concerning the status of [Ms Chifley] as a party, we refer to our previous correspondence to you. With regard to your advices concerning the availability of [Ms Chifley] for cross‑examination, we confirm that our client requires [Ms Chifley] to attend court for the purpose of cross-examination in person.
On 21 July 2017, Ms Chifley’s solicitor wrote a further letter to the wife’s solicitor. Because of technological difficulties that letter was not sent until it was sent by facsimile on 22 July 2017. Ms Chifley’s solicitor stated:
We are instructed that there has not been compliance with the Family Law Rules in respect to the joinder of [Ms Chifley] as Second Respondent in the proceedings. Procedural fairness demands that our client be given the opportunity of understanding the basis of any claim made by your client on her assets in relation to past transactions with the Respondent and, to date, no information, documentation or evidence has been filed or served on [Ms Chifley] in that regard. We further note that no reference to the joinder or orders sought against [Ms Chifley] is made in the Applicant’s Case Outline forwarded today to the Court.
We are instructed that [Ms Chifley] does not consent to be joined and will seek that the joinder and the order sought against her be dismissed with an order for the Applicant to pay her costs of and relating to the hearing on an indemnity basis.
If the Applicant intends to press the joinder of [Ms Chifley] as Second Respondent and seek order 1A in the Amended Initiating Application, we are instructed to seek an adjournment and for the matter to be set down for a further procedural hearing in accordance with rule 11.10 of the Family Law Rules 2004.
We note that [Ms Chifley] has been requested to attend Court on Monday for cross examination. [Ms Chifley] resides in [D Town] and proposes to travel to Sydney over the weekend at considerable expense notwithstanding her medical condition.
Please provide confirmation of whether the joinder is pressed and/or whether the Applicant consents to the main hearing being adjourned by no later than 8pm this evening to avoid [Ms Chifley] travelling to Sydney unnecessarily.
An order for the Applicant to pay [Ms Chifley]’s travel costs will be sought in the event the hearing is adjourned.
No response was received by Ms Chifley’s solicitors to that letter.
On 24 July 2017, Ms Chifley appeared by counsel. Counsel for Ms Chifley told the Court that the application to join her in the proceedings was opposed, but that, in the event that Ms Chifley was to be joined as a party, she was instructed to apply for an adjournment.
The solicitor for the wife then told the Court that, if the joinder of Ms Chifley was likely to result in an adjournment, he did not press the application.
Having regard to the fact that Ms Chifley had not, as required by the rules, been served with any of the affidavits filed in the proceedings, and that she had not been afforded the opportunity to inspect any of the material produced on subpoena, procedural fairness demanded that, if Ms Chifley was to be a party, the proceedings would be adjourned.
When that was explained to the solicitor for the wife, he withdrew the application to join Ms Chifley.
On 24 July 2017, directions were made for the filing of affidavits and written submissions in relation to costs and counsel for Ms Chifley was given leave to withdraw. Ms Chifley was directed to file her material within 14 days and the wife was given a further 14 days to file.
The matter proceeded and ultimately settled after the cross-examination of the wife and her witnesses had been completed, but before the completion of the cross-examination of the husband.
On 26 July 2017, the solicitors for Ms Chifley offered to compromise their claim for costs in the sum of $20,000. No response was received to that offer.
Ms Chifley now applies for an order that the wife pay her costs of the proceedings on an indemnity basis.
The first issue to be determined is whether the wife should pay Ms Chifley’s costs. If that question is determined in the affirmative, the next question is whether those costs should be paid on an indemnity basis.
In relation to costs, the application falls to be determined in accordance with the provisions of s 117(2A) of the Family Law Act 1975 (Cth) which are set out below:
(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.
The financial circumstances of each of the parties to the proceedings
The wife had filed a Financial Statement in the substantive proceedings and had been cross-examined in relation to that Financial Statement. It was her case that she was impecunious, her only asset being an apartment in Sydney in relation to which there was no evidence of value. However, I am satisfied that she had equity in the apartment although I cannot specify the quantum.
The wife received $75,000 by way of settlement of her property proceedings against the husband.
There is no evidence of Ms Chifley’s financial position.
In Lenova & Lenova(Costs) [2011] FamCAFC 141 the Full Court of the Family Court held:
10. In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.
…
12. That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.
13. Whilst regard is had to the financial circumstances of the respondent wife, she was advised by legal practitioners at each stage of the proceedings. She can, in our view, be seen to have known the risks of refusing to compromise in the face of a written offer made before the appeal was filed. That factor, together with the husband’s success in the appeal, warrants an order for costs being made in favour of the husband.
The conduct of the parties
The conduct of the wife in joining Ms Chifley as a party by filing an application seeking orders against her on 5 June 2017, not serving the application until 28 June 2017, not complying with the Family Law Rules, and then, on the first day of the hearing, withdrawing the application, have been fully canvassed above.
On behalf of the wife, it is submitted that Ms Chifley was required to attend for cross-examination in relation to the affidavit sworn in the husband’s case. I accept that, if Ms Chifley had been joined as a party, she could also have been cross-examined in that capacity.
However, after the application seeking orders against Ms Chifley was withdrawn, the matter proceeded and Ms Chifley would have been required to attend for cross-examination had the proceedings not ultimately settled.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The wife was wholly unsuccessful in seeking orders against Ms Chifley, her application being withdrawn on the first occasion possible at the commencement of the hearing.
Offers
As stated earlier, the solicitors for Ms Chifley offered, by way of a text message to the wife’s solicitors on 26 July 2017, to compromise their claim for costs in the sum of $20,000. That offer indicated that Ms Chifley’s costs had exceeded $25,000. No response was received to that offer.
CONCLUSION
Taking all of those matters into account, the wife should pay Ms Chifley’s costs of and incidental to the unsuccessful application to join Ms Chifley as a party to the proceedings and seek orders against her.
INDEMNITY COSTS
The Full Court has most recently considered the law in relation to indemnity costs in Prantage & Prantage (2013) FLC 93-544. The majority set out the principles to be applied, confirming that the principles enunciated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 should continue to be applied in the Family Court of Australia.
In the joint judgment of Thackray and Ryan JJ, their Honours set out the settled law relating to indemnity costs and recorded as follows:
76. The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised.
77. This Court recognised in Kohan (supra) 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, at 79,605:
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 s 117(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.
78. The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:
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.
79. At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”. We consider citation of authority to this effect would be otiose, so well accepted is the proposition.
80. We know of one attempt in another jurisdiction to move away from the “usual rule” that costs are awarded on a party and party basis. In Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579, Einfeld J gave reasons why the “usual rule” should no longer apply in the Federal Court of Australia.
81. The views expressed by Einfeld J were the subject of prompt criticism by the Full Court of the Federal Court in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151, where Black CJ said at 153:
Recently, in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128, Einfeld J expressed the view that it was wrong to begin any consideration of costs by reference to a usual rule. Rather, he considered, the question of costs should be determined on its merits without any usual rule or preconception as to the costs issue (see at 133). Other judges, however, have continued to follow the established approach (see, for example, MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236) and it was recently applied by a Full Court in McHattan v Saramoa Charters Pty Ltd (unreported, Federal Court, Full Court, 17 September 1996). Moreover, one of the difficulties with any different approach is that O 62 of the Federal Court Rules 1979(Cth), the costs order, proceeds on the footing that in the ordinary case costs will be ordered on a party and party basis. This is now reinforced by the provisions of O 23, r 11(4). Order 23 provides for the making of offers of compromise and, in specified circumstances, r 11(4) provides for a presumptive entitlement to costs on a party and party basis up to and including the day an offer was made and for indemnity costs after that day. Another difficulty with any departure from the established approach, an approach described by Sheppard J in Colgate-Palmolive (at 233) as “entrenched”, is the uncertainty that a different approach would involve.
It may be that on some future occasion a Full Court will nevertheless be asked to reconsider the basis upon which indemnity costs orders in this Court should be made, but no such invitation was extended in this case and the present application for indemnity costs should be considered in accordance with the well established principles discussed by Sheppard J in Colgate-Palmolive and summarised by Hill J in John S Hayes.
82. Cooper and Merkel JJ went further in their joint judgment in Re Wilcox. They said at 156-157:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
The recent decision of Einfeld J in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 has cast doubt on these principles. In Marks, after discussing s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA) and a number of policy considerations in relation to costs, Einfeld J concluded (at 133):
“The matter of the interaction of ‘the usual rule’, particularly as affects indemnity costs, with the statutory regime of the Federal Court Act is one which in my most respectful opinion requires fresh attention. An interpretation which I believe to be more in keeping with such a statutory provision is that the court is to start with no ‘usual rule’ or preconceptions as to the costs issue. Rather, the question of costs, like other aspects of the case, will fall to be determined on its merits. This means that the applicant for indemnity costs must put forward all of the circumstances which suggest that the most [r]igorous order should be made.”
In the light of that conclusion it is desirable that we set out our views on the manner in which the court's jurisdiction to award indemnity costs ought to be exercised.
Until Marks the principles enunciated in Colgate-Palmolive and generally applied in the Court were:
1. Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2. In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c) whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
83. Cooper and Merkel JJ went on to consider relevant provisions of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 1979.Having done so, their Honours said, at 158:
As was pointed out by Sheppard J in Colgate-Palmolive, the costs for which these rules provide are costs on a party and party basis. The rules do not deal with the award of costs on any other basis. Although the gap between actual costs and the scale rate used in determining party and party costs may be increasing, it is relevant to note that the criterion in r 19 in respect of the items for which costs may be recovered allows recovery of all such costs, charges and expenses as appear to the taxing officer:
“to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party … ”
…
The rules apply unless otherwise ordered. The very fact and terms of the relevant rules suggest to us that, unless the justice of the particular case requires or some special or unusual feature arises, the rules should not be departed from by the making of some other order for costs in exercise of the jurisdiction conferred under s 43 [of the Federal Court Act]. The generality of the criteria for departing from the usual rule ensures that the discretion to depart from the rule can be exercised whenever the Court is of the view that after applying the criteria to the facts of the particular case, it is just to do so. Such an approach is consistent with the requirement that the discretion to award costs is to be exercised judicially.
However, there are other reasons for continuing to apply the principles that have been generally applied in the Court.
As was also pointed out by Sheppard J in Colgate-Palmolive, for the reasons discussed by him, the ordinary rule in favour of party and party costs, has been settled practice in the courts in England and Australia over a very long period of time. It is not readily apparent why that practice should be changed. It may well be that the scale rates, rather than the principles, require review.
Further, a general discretion of the kind suggested by Einfeld J is likely to give rise to greater disputation over costs than already exists, with possible inconsistency within the Court and between courts. Such outcomes do not advance and are not in the interests of the administration of justice.
The combination of these factors leads us to the view that the principles enunciated in Colgate-Palmolive as stated above ought to continue to be applied in the Court.
In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, Sheppard J set out some of the circumstances in which there might be a departure from the ordinary rule that costs are ordered on a party and party basis:
… it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance (sic) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher(No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records).
The reference to Fountain is a reference to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) 81 ALR 397, in the Federal Court where Woodward J held:
… I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 or the clearly established law. Such cases are, fortunately, rare.
The Full Court of the Family Court of Australia in Yunghanns & Yunghanns (2000) FLC 93‑029 said:
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 an order is sought.
On behalf of Ms Chifley, it is submitted that, properly advised, the wife should have known that there was no chance of the hearing proceeding on the allocated days if Ms Chifley were joined as a party in circumstances where she had not been served with the relevant affidavits.
In the alternative, it is submitted that, properly advised, the wife should have known that if she did not wish to have the matter adjourned, she could not maintain the application against Ms Chifley.
Further it is submitted that the wife filed no material impugning the transaction between Ms Chifley and the husband in 2011.
It is submitted that the wife, in maintaining her application to join Ms Chifley in the face of the advice in the letter from Ms Chifley’s solicitor that Ms Chifley would apply for an adjournment, caused Ms Chifley to incur significant costs without a proper basis for so doing.
In seeking to join Ms Chifley as a party, the wife relied on the provisions of s 106B of the Family Law Act 1975 (Cth), the relevant portions of which are set out below:
FAMILY LAW ACT 1975 - SECT 106B
Transactions to defeat claims
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A) Omitted
(1B) Omitted
(2) The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA) An application may be made to the court for an order under this section by:
(a) a party to the proceedings; or
(b) a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c) any other person whose interests would be affected by the making of the instrument or disposition.
(4A) In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
(5) In this section:
"disposition " includes:
(a) a sale or gift; and
(b) the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
"interest " :
(a) in a company includes:
(i) a share in or debenture of the company; and
(ii) an option over a share in or debenture of the company (whether the share or debenture is issued or not); and
(b) in a trust includes:
(i) a beneficial interest in the trust; and
(ii) the interest of a settlor in property subject to the trust; and
(iii) a power of appointment under the trust; and
(iv) a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v) an interest that is conditional, contingent or deferred.
At the very least, the onus is on the wife to prove the following elements of s 106B:
· That an order for property settlement was actual or anticipated at the time of the transaction;
· That the relevant disposition is likely to defeat an order for property settlement;
· That the transaction was not a bona fide transaction on the part of the person who benefited from the disposition.
Taking the wife’s evidence at its highest, for the purpose of this consideration, the wife has not discharged that onus.
At the time of the transaction in 2011, the parties had not separated and they did not separate until May 2013. No proceedings were, at the time of the transaction, anticipated.
At the commencement of the hearing between the husband and the wife, a joint balance sheet was handed up. The wife contended that the gross assets of the husband were $3,650,000. The husband contended that his gross assets were $2,950,000 together with an interest in superannuation of $858,000. The husband asserted that he had liabilities of $1,997,664 leaving him, on his own case, with net assets including superannuation of $1,810,336. There were ample funds available to meet any adjustment which might have been made in favour of the wife as a result of the payment of $270,000 to Ms Chifley from the husband’s remaining funds.
There was no benefit to the wife from joining Ms Chifley and no forensic necessity to do so.
There is no evidence that the payment of $270,000 to Ms Chifley is likely to have the effect of defeating the wife’s claim, having regard to the nature and size of the asset pool, the duration of the relationship and the limited extent of the contributions which the wife claims she made.
I consider that the conduct of the wife, in persisting with the application to join Ms Chifley in circumstances where, because of the lateness of the application and the wife’s non-compliance with the rules requiring the provision of the relevant evidence, it must have been clear to those representing her that an adjournment was inevitable, would of itself justify an order that the wife pay costs on an indemnity basis.
Such an order is further justified when it is clear that, having regard to the assets available, it was not necessary to join Ms Chifley in order for the wife to achieve a just and equitable outcome.
An order will be made that the wife pay Ms Chifley’s costs on an indemnity basis. However, those costs are confined to the costs of the wife’s application filed 5 June 2017 and do not include costs incurred as a result of the service of subpoenas or as a result of being required for cross-examination.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 6 September 2017.
Associate:
Date: 6/9/2017
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