Child Support Registrar and Kanavos and Ors

[2011] FMCAfam 625

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CHILD SUPPORT REGISTRAR & KANAVOS & ORS [2011] FMCAfam 625

CHILD SUPPORT – Costs – indemnity costs.

Family Law Act 1975, ss.117AB, 117AB(1)(b), 117AB(2)

Botany Municipal Council v Secretary, Department of Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412
Child Support Registrar & Kanavos & Anor [2010] FamCAFC 244
Child Support Registrar & Kanavos & Anor [2009] FMCAfam 871
Child Support Registrar & Kanavos & Anor (No.2) [2009] FMCAfam 1476
D & D (Costs No.2) [2010] FamCAFC 64
Kohan & Kohan (1993) FLC92-340
Limousin & Limousin (Costs) [2007] 38 FamLR 478
NMFM Property Pty Limited and Anor v City Bank Limited (No.2) (Court’s “NMFM” Judgment No.11) (2001) 109 FCR 77
Stephens & Stephens & Anor (Enforcement) (Costs) [2010] FamCAFC 172

Applicant: CHILD SUPPORT REGISTRAR

First Respondent: MR KANAVOS

Second Respondent: MS KANAVOS

Third Respondent: [W] PTY LTD

File Number: SYC 3565 of 2007

Judgment of: Altobelli FM

Hearing date: By written submissions

Date of Last Submission: 10 March 2011

Delivered at: Sydney

Delivered on: 24 June 2011

REPRESENTATION

Solicitors for the Applicant: Australian Government Solicitor

Solicitors for the Respondents: Graham Chegwidden Solicitor

ORDERS

THE COURT ORDERS THAT:

1. The First Respondent is to pay 90% of the costs of the Applicant as agreed, or failing agreement as assessed.

IT IS NOTED that publication of this judgment under the pseudonym Child Support Registrar & Kanavos & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYC 3565 of 2007

CHILD SUPPORT REGISTRAR

Applicant

And

MR KANAVOS

First Respondent

MS KANAVOS

Second Respondent

[W] PTY LTD

Third Respondent

REASONS FOR JUDGMENT

Introduction

1. The application before me is one for costs sought by the Child Support Registrar.  The matter has quite a long and complex history.  The substantive judgment in the proceedings was delivered on 20 August 2009 and is reported as Child Support Registrar & Kanavos & Anor [2009] FMCAfam 871. My reasons in the subsequent costs application were delivered on 25 November 2009 and are reported as Child Support Registrar & Kanavos & Anor (No.2) [2009] FMCAfam 1476. I dismissed the application for costs by the Child Support Registrar. On 10 December 2010 the Full Court allowed the appeal by the Child Support Registrar against the costs judgment. The Full Court decision is reported as Child Support Registrar & Kanavos & Anor [2010] FamCAFC 244. As a result of the Full Court appeal the matter was remitted to me for re-hearing.

2. On 14 February 2011, directions were made by consent for the costs application to be determined “on the papers” by reference to previous submissions on costs, the appeal judgment, and the further submissions filed by the parties.  The further submissions of the Child Support Registrar are dated 2 March 2011, filed 3 March 2011.  The further submissions of the respondent Mr Kanavos were filed 10 March 2011.  The Child Support Registrar’s submissions are supported by an affidavit of Ms F, and the respondent’s submissions are supported by an affidavit filed 10 March 2011 sworn by Mr Kanavos.

3. The submissions filed on behalf of both parties are quite comprehensive and the Court expresses its gratitude to the parties’ representatives for providing such comprehensive written submissions.

4. It is always an interesting, as well as humbling, experience for a judicial officer to go back and reconsider reasons for judgment given in a matter, after a successful appeal.  Both the passage of time, and the reasons of the Full Court provide ample opportunity for reflection. 

5. There can be no doubt that the substantive reasons I gave on 20 August 2009 made some very strong, indeed scathing, findings against the First Respondent. There is no need for me to set out, or even refer to these findings as they have been so carefully identified in the further submissions of the Child Support Registrar on costs dated 2 March 2011. Having regard to the reasons of Her Honour Justice Boland in the Full Court, I think that there is no doubt that a party to the proceedings, namely Mr Kanavos, “knowingly made a false allegation or statement in the proceedings.” Having regard to that, s.117AB(2) compels me to “order that party to pay some or all of the costs of another party”.

6. When I reflect on the reasons I gave in the first costs application it is quite clear that I was frustrated with the applicant’s legal strategy of raising the issue of a secret trust very late in these proceedings in circumstances there was clearly no evidence to support it.  Whilst my view about this is not changed, even after having the benefit of the Full Court’s reasons, on reflection I accept that even the late introduction of the secret trust issue did not necessarily mean that there should be no order for costs at all.  Moreover, and with reflection, to say that the matter would have settled if the secret trust issue had not been raised is overly optimistic, and ignores the complexity of the likelihood of settling the inevitable costs issue, having regard to the findings I made against Mr Kanavos, and the lengthy proceedings.  Thus, whilst the futile late introduction of the secret trust issue probably prolonged the proceedings by a day or so, it does not necessarily mean that the case would have settled if it had not been introduced, and in any event it does not alter the fundamental substratum of the deception that I find was clearly perpetrated by the First Respondent.  Thus, the late introduction of the secret trust issue is a matter that goes to the quantification of costs, rather than whether a costs order should have been made.

7. When the secret trust issue is viewed in the broader context of the issues of this case and the amount of time exerted to resolve them, I am satisfied that it was a distraction or diversion amounting to more than 10% of the likely costs incurred.  Thus, in the circumstances of this case, and having regard to the matters raised in the submissions of the parties and in the Full Court’s judgment, an order for 90% of the costs is appropriate.

8. The Child Support Registrar’s application is for indemnity costs.  The Child Support Registrar submits that it is appropriate to make such an order having regard to the cost and delay caused by the First Respondent’s failure to make full and frank disclosure, and his various deceptions to the Court, as articulated in the substantive reasons.  The Child Support Registrar submits that this is a case where the First Respondent’s behaviour could be described as “intentionally obstructionist” and this warranting an order for indemnity costs.

9. The Full Court has discussed the circumstances in which indemnity costs should be ordered in a number of cases including D & D (Costs No.2) [2010] FamCAFC 64, Limousin & Limousin (Costs) [2007] 38 FamLR 478 and Kohan & Kohan (1993) FLC92-340, together with the various cases referred to in those judgments.  It is clear from these cases that a Court should not lightly depart from the ordinary rules relating to costs between party and party unless there are exceptional circumstances justifying this.  It is clear that the categories of circumstances in which indemnity costs may be awarded is 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.  Some relevant circumstances include making allegations of fraud knowing them to be false, making irrelevant allegations of fraud, misconduct that causes loss of time to the Court and other parties, the fact that proceedings were commenced or continued for some ulterior motive or a wilful disregard of known facts or clearly established law, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions, and imprudent refusal of an offer to compromise.  It should be noted that the mere existence of the circumstances referred to does not automatically justify an order for indemnity costs. Obviously all of the circumstances of the case need to be taken into account, and there is a particular focus on the conduct of the party against whom such an order is sought.

10. There is a further useful passage in the Full Court’s decision in Stephens & Stephens (Enforcement) (Costs) [2010] FamCAFC 172. Paragraph 118 of the Full Court’s judgment states:

    Notwithstanding our general agreement with the submissions on behalf of the Wife, including that the proceedings were for enforcement, the disbursement of the amount of approximately $1.3 million, and other matters, we are not persuaded that the presumption in favour of party and party costs does not prevail. The Husband’s behaviour may in some respects fall within the description identified by Gummow J inBotany Municipal Council v Secretary, Department of Arts , Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415, as explained by Lindgren J in NMFM Property Pty Ltd and Others v Citibank Ltd (No.2) at [54], as “ethically or morally delinquent”. However, as Lindgren J made clear at [56]: “The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant” (emphasis in original). Lindgren J then gave an example in the same paragraph of a “proved case of fraud” and said that, in his opinion, “the presumption is that a costs order against the fraudulent party will be on the party and party basis”.

    The question that arises in this case is whether the conduct of the First Respondent was “ethically or morally delinquent” in his conduct as a litigant.

11. The cases referred to above create a high threshold before an order for indemnity costs should be made. Does the conduct of the First Respondent in this case cross that threshold? The Court needs to be very careful not to, in effect, double dip. The conduct of the First Respondent is, I am satisfied, conduct falling within s.117AB(1)(b), i.e. that he “knowingly made a false allegation or statement in the proceedings”. I accept that this warrants the making of an order for costs. Does the same conduct, however, also provide the basis for making an indemnity costs order? I think not. I think it requires more than the matters referred to in s.117AB(1)(b) to justify the making of an order for indemnity costs. If the legislature had intended that the conduct referred to in s.117AB warranted indemnity costs, it could have said so. Whilst the section does not preclude the making of an order for indemnity costs in the circumstances referred to, something more is needed, and I’m not satisfied the degree of culpability justifying an order for indemnity costs is apparent on the facts of this case.

12. Accordingly, I make an order that the First Respondent pay 90% of the costs of the Applicant as agreed, or failing agreement as assessed.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Altobelli FM

Date:  22 June 2011