Chontoglou & Chontoglou (No 4)
[2025] FedCFamC1F 72
•13 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Chontoglou & Chontoglou (No 4) [2025] FedCFamC1F 72
File number(s): DNC 98 of 2023 Judgment of: BEHRENS J Date of judgment: 13 February 2025 Catchwords: FAMILY LAW – COSTS – INTERIM HEARING – Where substantive property proceedings are part-heard – Where Application in Proceeding and Reply sought various orders and restraints – Where orders and restraints were sought by the Husband against the Wife, the Wife’s lawyers and a litigation funder – Where the third parties were joined solely for the purposes of the Application in a Proceeding – Where the bulk of the Application in a Proceeding and Reply was withdrawn and dismissed at the hearing – Where order sought against the Wife’s lawyers was pursued – Where power sought to be exercised was only revealed during submissions – Where power relied upon was the power to make a personal costs order against the Wife’s lawyers – Where application was summarily dismissed – Where each respondent makes an application for costs –Where the Respondent Wife’s costs were reserved – Where Husband concedes a costs order would be made in favour of the Third Respondent – Where there are circumstances justifying a costs order in favour of the Second Respondent – Where circumstances justify a costs order being made on other than the usual basis – Where costs order in favour of the Second Respondent made on a solicitor and client basis –Where there are exceptional circumstances which justify the order for costs in favour of the Third Respondent being on an indemnity basis – Where costs will be assessed if not agreed – Where the orders made do not discharge or vary any restraints on the Applicant’s ability to deal with property Legislation: Family Law Act 1975 (Cth) ss 95, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 12.17
Cases cited: Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248; [1993] FCA 536
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
In the Marriage of W P J Munday and H J Bowman (1997) FLC 92-748; (1997) 22 Fam LR 321
Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116
Lao & Zeng (2021) FLC 94-053; [2021] FedCFamC1A 17
Madin & Palis (Costs) (2016) 55 Fam LR 59; [2016] FamCAFC 25
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123; [2005] FamCA 158
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Quickley & Pelissier [2016] FamCAFC 124
Ragatta Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175; (Unreported, Federal Court of Australia, Davies J, 5 February 1993).
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187; (Unreported, Federal Court of Australia, French J, 3 May 1991)
Division: Division 1 First Instance Number of paragraphs: 37 Date of last submission/s: 10 February 2025 Date of hearing: 10 February 2025 Place: Sydney Solicitor for the Applicant: Ms Farmer, AFL Withnalls Counsel for the First Respondent: Mr Clancy Solicitor for the First Respondent: LL Lawyers Counsel for the Second Respondent: Mr Pintos-Lopez Solicitor for the Second Respondent: Lander & Rogers Solicitor for the Third Respondent: Final Law Pty Ltd ORDERS
DNC 98 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR CHONTOGLOU
Applicant
AND: MS CHONTOGLOU
First Respondent
KK PTY LTD
Second Respondent
LL LAWYERS
Third Respondent
ORDER MADE BY:
BEHRENS J
DATE OF ORDER:
13 FEBRUARY 2025
THE COURT ORDERS THAT:
1.The Applicant Husband will pay to KK Pty Ltd its costs of responding to the Application in a Proceeding filed 24 October 2024 and the Reply filed 13 November 2024 calculated on a solicitor and client basis, as agreed or, in default of agreement within 14 days, as assessed.
2.The Applicant Husband will pay to LL Lawyers its costs of responding to the Application in a Proceeding filed 24 October 2024 and the Reply filed 13 November 2024 on an indemnity basis, as agreed or, in default of agreement within 14 days, as assessed.
3.The Applicant Husband will pay the costs of any assessment of the costs of KK Pty Ltd and of LL Lawyers.
THE COURT NOTES THAT:
A.These orders determine the costs of KK Pty Ltd and LL Lawyers reserved by orders made 13 November 2024, 14 November 2024 and 19 November 2024.
B.These orders do not vary or discharge orders previously made restraining the Applicant Husband from dealing with various assets and income.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chontoglou & Chontoglou been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BEHRENS J
These Reasons deal with applications for costs made by the Second Respondent, being KK Pty Ltd (“KK Pty Ltd”), a litigation funder, and the Third Respondent, being LL Lawyers (“LL Lawyers”), solicitors for the Respondent Wife. The applications are for the costs of and associated with responding to the Application in a Proceeding filed 24 October 2024 (“the Application”) and the Reply filed 13 November 2024 (“the Reply”). The Application and Reply were filed by the Applicant Husband in property proceedings which are part-heard before Kari J. KK Pty Ltd and LL Lawyers were only parties for the purposes of the Application and Reply. They are not parties in the substantive proceedings.
The Application and Reply were before me on 27 November 2024. During the hearing, the Application and Reply, so far as they sought orders against the Respondent Wife and KK Pty Ltd, were withdrawn and dismissed. Only one order was then sought, namely, an order that LL Lawyers be required to repay to KK Pty Ltd all funds that had been paid to LL Lawyers. I summarily dismissed the Application so far as it sought that order. I delivered my Reasons for Judgment on the same day, and I incorporate those Reasons for Judgment into these Reasons.
Indemnity costs were sought by KK Pty Ltd's Response to an Application in a Proceeding filed 25 November 2024 and by LL Lawyers’ Amended Response filed 26 November 2024. The Respondent Wife also had an application for costs before me, and I reserved those costs on the basis that Kari J will be in a better position to determine whether a costs order should be made in the Respondent Wife's favour at trial.
I note that Orders were made by Kari J as follows:
·on 13 November 2024 reserving KK Pty Ltd’s costs in relation to the Application in a Proceeding;
·on 14 November 2024 reserving all parties’ costs in relation to the attendance on 14 November 2024; and
·on 19 November 2024 reserving all parties’ costs of and incidental to that court attendance.
The orders which I make will determine those reserved costs so far as KK Pty Ltd and LL Lawyers are concerned. It is appropriate that I deal with those costs applications, given that I heard the relevant application and given that KK Pty Ltd and LL Lawyers are not otherwise parties to the proceedings. It is not in the interests of justice for the determination of those costs applications to be delayed until after judgment has been delivered in the substantive proceedings, which may be some months away.
The following documents were relied upon in KK Pty Ltd’s case:
(1)Response to Application in a Proceeding filed 25 November 2024;
(2)Outline of submissions filed 6 December 2024;
(3)Affidavits of Mr MM filed 12 November 2024, 25 November 2024 and 29 November 2024;
(4)Transcript of the proceedings on 27 November 2024 (marked R2-1);
(5)The Agreement between the Wife and KK Pty Ltd dated 31 July 2024 (marked R2-2);
(6)Notice of Costs filed 10 February 2025 (marked R2-3).
The following documents were relied upon in LL Lawyers’ case:
(1)Amended Response filed 26 November 2024;
(2)Outline of submissions filed 6 December 2024;
(3)Affidavit of Ms NN filed 29 November 2024;
(4)Outline of Case on behalf of LL Lawyers filed 26 November 2024 (marked R3-1);
(5)Outline of Case on behalf of the Applicant Husband filed 26 November 2024 (marked R3-2);
(6)Schedule of Costs filed 29 November 2024 (marked R3-3).
The following documents were relied upon in the Applicant's case:
(1)Application in a Proceeding filed 24 October 2024;
(2)Reply filed 13 November 2024;
(3)Application to Intervene filed on behalf of KK Pty Ltd on 12 November 2024;
(4)Outline of submissions filed 6 December 2024;
(5)Affidavit of Mr Chontoglou filed 22 November 2024;
(6)Costs Notice (Final Law) filed 26 November 2024 (marked A1).
LEGAL PRINCIPLES – SHOULD COSTS BE AWARDED?
Pursuant to s 117(1) of the Family Law Act 1975 (Cth) (“the Act”), the default position is that each party is responsible for bearing their own costs. By virtue of s 117(2), the Court is empowered to make a “just” costs order where there are circumstances that justify it doing so.
As to the exercise of the Court’s discretion with respect to costs orders under s 117(2), the Act provides in s 117(2A) that consideration must be given to the following:
(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.
Whilst I am required to consider these factors “to the extent they are relevant”, the weight I attribute to such matters is at my discretion (Lao & Zeng (2021) FLC 94-053 at [42]), and s 117(2A) does not identify any one or more factors as necessary for a costs order under s 117(2) to be made (PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 at [41]).
In Kohan & Kohan (1993) FLC 92-340 (“Kohan”), the Full Court observed that:
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.
In Penfold v Penfold (1980) 144 CLR 311, the High Court considered that while there must be justifying circumstances for a costs order to be made, no “additional or special onus” is placed upon applicants in their pursuit of costs. Once justifying circumstances are found, the court has discretion to award costs.
DETERMINATION OF THE APPLICATION BY KK PTY LTD
The Applicant Husband did not concede that an order for costs would be made in favour of KK Pty Ltd. The essence of the submissions appeared to be that the Applicant Husband had not sought an order against KK Pty Ltd, and so had not been “wholly unsuccessful” as against KK Pty Ltd, with the consequence that a costs order should not be made. This submission was misconceived, in part because it assumed that the only relevant factor in determining whether I should make a costs order was whether the Applicant Husband had been wholly unsuccessful.
In any case, the Application in a Proceeding filed on 24 October 2024 did seek an order (Order 3) against KK Pty Ltd – although KK Pty Ltd was not then a party to the proceedings – that:
… all security pledged by the Respondent Wife against real or other property held in Australia to [KK Pty Ltd] for the Line of Credit be forthwith released and the Respondent Wife and [KK Pty Ltd] be restrained from further encumbering or securing any interest in any real or other property held jointly in either of the parties [sic] sole names in Australia.
I did not therefore understand the submission as contained in the brief written submissions filed on behalf of the Husband on 6 December 2024 that “[t]here were no Orders contended for as against KK Pty Ltd [sic] within the Application in a Proceeding…”. I was told that the Reply filed 13 November 2024 amended the relief sought, with the consequence that Order 3 was no longer sought, and that the Applicant Husband instead sought Order 5,which bound only the Wife and provided:
That the Wife take all steps necessary to cause any security granted by her or on her behalf in favour of [KK Pty Ltd] [sic] over any property in which the Husband has any interest to be discharged.
The Reply did not specifically amend the relief sought, and the Case Outline filed by the Husband on 26 November 2024 (“the Husband's Case Outline”) sought “orders in terms of Order 1, 2, 3 and 4 of the Application in a Proceeding filed 21 October 2024 [sic] and order 5 of the Reply filed 13 November 2024”. So far as the Husband’s Case Outline concerned Order 3, a correction was made at the hearing and it was conceded that KK Pty Ltd understood that Order 3 in the Application in a Proceeding was no longer being sought. The Husband's Case Outline, without prior notice, sought orders in the alternative “releasing the [M Street, H Street and U Street] property from the terms of any security provided by the Wife to [KK Pty Ltd]”. If such an order were made – and it is not clear how it could be – it would affect KK Pty Ltd's contractual rights. The Applicant Husband withdrew his application for such an order at the hearing and so was wholly unsuccessful in having any order made in such terms.
The following matters persuade me that there are justifying circumstances to make a costs order in favour of KK Pty Ltd, and that it is just and equitable to do so:
(1)KK Pty Ltd is a third party which, given the various orders sought (including, at least initially, orders which would bind KK Pty Ltd), has been required to intervene in proceedings to defend its contractual rights pursuant to its Agreement with the Wife.
(2)It is difficult to see how the orders sought could have been made.
(3)The Husband has been wholly unsuccessful in obtaining any relief which would affect those contractual rights, and his application for an order binding KK Pty Ltd or affecting KK Pty Ltd’s contractual rights was withdrawn and dismissed.
(4)That withdrawal occurred at the last minute, notwithstanding that, on 6 November 2024, KK Pty Ltd had written to the Husband's lawyers pointing out the difficulties with the Application, and inviting him to withdraw his Application. At that stage, KK Pty Ltd was not a party, and so the implication of that invitation was that there would be no costs order.
(5)When such withdrawal did not occur, KK Pty Ltd appropriately intervened in the proceedings. The continuation of this intervention was appropriate, given the lack of clarity about what orders the Husband was pressing, and given that KK Pty Ltd’s contractual entitlements would be affected by any order made against the Wife.
Other than the imposition of various restraints by Orders made on 26 April 2023, there was no evidence before me as to the Husband's financial circumstances.
There remains the question of the basis upon which costs should be awarded. KK Pty Ltd seeks costs on an indemnity basis. I assume that it was the Husband’s position that, if costs were awarded, that they be on the scale.
Rule 12.17 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) specifies:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b) as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or (d) for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
(2) If costs are payable under the Family Law Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party and party basis.
(3) In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable proceedings;
(d) whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e) the time properly spent on the proceeding, or in complying with pre-action procedures;
(f) whether expenses (paid or payable) are fair, reasonable and proportionate.
The factors in r 12.17, those in s 117(2A), and the overarching purpose of the family law practice and procedure provisions (s 95 of the Act), are relevant to my decision about the basis on which to order costs. There is also case law, particularly that which concerns when costs will be awarded on a basis other than party and party, which applies.
In Quickley & Pelissier [2016] FamCAFC 124 at [119]-[122] the Full Court set out applicable principles, although only dealing with the decision whether to award costs on a party/party basis or costs on an indemnity basis:
In Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at 256, Sheppard J referred to the “settled practice” that where a court orders one party to pay another party's costs, the order is for costs to be paid on a party/party basis. His Honour also said “there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice” at 257.
In an appropriate case the court has a discretion to order costs on an indemnity basis. An order made in the exercise of that discretion is a very great departure from the normal approach and the circumstances justifying the departure should be of an exceptional kind (Kohan & Kohan (1993) FLC 92-340).
In the recent case of Madin & Palis (Costs) [2016] FamCAFC 25 this Court made reference to the increasing number of applications for indemnity costs and said at [23]:
Finally, we take the opportunity to observe that in so far as the appellant sought an order for indemnity costs, applications for such costs should only be made, and such costs will only be ordered, in the most extreme cases. This is particularly so having regard to the fact that the primary rule in this jurisdiction is that each party should pay their own costs.
In Kohan, the Full Court, in observing that indemnity costs are the exception, said that:
… 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.
In In the Marriage of W P J Munday and H J Bowman (1997) 22 Fam LR 321, Holden CJ listed circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis, being:
(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.
(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 (French J, Fed C of A, 3 May 1991, unreported).
(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 (Davies J, Fed C of A, 5 March [sic] 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
I assume that these principles apply also to an award of costs on a solicitor and client basis (that is, something short of an indemnity).
In addition to the matters referred to at paragraph 17 above, the following were raised as matters which would warrant an award of costs on an indemnity basis:
(1)The orders sought in the Application and Reply as against KK Pty Ltd and as against the Wife, so far as they would affect KK Pty Ltd's contractual relationship with her, were entirely unmeritorious and doomed to fail. This was raised with the Husband’s lawyers on 6 November 2024, but he did not withdraw until during the hearing on 27 November 2024.
(2)When KK Pty Ltd wrote to the Husband on 6 November 2024 inviting him to withdraw his application, KK Pty Ltd was not yet a party to the proceedings and so there would presumably have been no costs payable by the Husband had he withdrawn at that stage. The Husband’s failure to withdraw and persistence until the hearing of the matter on 27 November 2024 meant that KK Pty Ltd’s invitation was an offer of compromise which was imprudently refused.
(3)The Husband's conduct of the matter was confusing, unreasonable, and procedurally unfair to KK Pty Ltd and wasted the Court’s and KK Pty Ltd’s time.
As I have indicated above, it is difficult to see how the orders sought in the Application and Reply, at least so far as they affected KK Pty Ltd, could have been made. Following the Husband being put on notice, a Reply was filed. Although not clear on the face of the document, everyone appears to agree that the Reply amended the relief sought, such than an order was no longer sought against KK Pty Ltd. Nonetheless, this position was further confused by the filing of a Case Outline, which mistakenly indicated such an order was sought, and also sought further orders without notice. I do not find that this was wilful misconduct, nor can I be satisfied that the Application was brought for an ulterior motive. Such conduct was, however, confusing, unreasonable, and procedurally unfair to KK Pty Ltd. It wasted time. The offer made on 6 November 2024 was imprudently refused.
The costs claimed by KK Pty Ltd on an indemnity basis are $82,695, plus the costs of the costs application. I have not interrogated the Schedule of Costs filed, but that amount seems disproportionate in circumstances where the maximum amount which can be advanced to the Respondent Wife pursuant to KK Pty Ltd’s agreement with her is $250,000, where costs were incurred over a relatively short period, and where the issues were not complex (including because of the obvious lack of merit in the application).
For the reasons set out above, I am satisfied that it is just and equitable for a costs order to be made on other than the usual basis, but I am not prepared to make an order for costs on a full indemnity basis, nor on a lump sum basis. I therefore make an order for costs on a solicitor and client basis. Unless the parties can reach an agreement about the amount, costs will need to be assessed, and it is appropriate that the Husband pay the costs of such an assessment as it was his Application which caused the costs to be incurred.
DETERMINATION OF THE APPLICATION BY LL LAWYERS
In oral submissions, it was conceded on behalf of the Applicant Husband that the Court would make a costs order in favour of LL Lawyers, on the basis that the Applicant Husband pressed for an order to be made against LL Lawyers on 27 November 2024 and was wholly unsuccessful.
Accordingly, the only matter to be determined is the basis upon which such a costs order should be made. On behalf of LL Lawyers, it was contended that costs should be awarded on a lump sum, indemnity basis. On behalf of the Applicant Husband, it was contended that costs should be awarded on the scale.
I have summarised above the relevant law regarding the basis upon which costs should be awarded. The lack of merit in the Husband's application against LL Lawyers is dealt with in my Reasons for Judgment dated 27 November 2024. Again, it was a wholly unmeritorious application, made worse because the basis on which the order was sought (a personal costs order against LL Lawyers) was only made clear during submissions. On 19 November 2024, lawyers for LL Lawyers wrote to the Husband's lawyers putting them on notice as to the unmeritorious application and the intention to seek indemnity costs if the application was pursued. The Husband's conduct in pursuing an order against the Wife's lawyers jeopardised the Wife's legal representation, such that her lawyers went off the record prior to the hearing of the Application in a Proceeding and she was unrepresented at that hearing. All of this constitutes conduct which was not consistent with the overarching purpose of the family law practice and procedure provisions of the Act.
The claim by LL Lawyers is for actual costs of $31,427 plus the costs of the costs application. This is more reasonable and proportionate than the claim made by KK Pty Ltd. My attention was, however, drawn to entries in the Schedule of Costs which it was said reflected unreasonable costs incurred, as well as inconsistencies in the estimates of costs, about which there was evidence. I am not able to determine those matters.
For the reasons set out above, I am satisfied that there are exceptional circumstances which warrant the making of an order for indemnity costs in favour of LL Lawyers. Given the matters raised with me, unless agreement can be reached within 14 days, costs will need to be assessed. It is appropriate that the Husband pay the costs of such an assessment as it was his Application which caused the costs to be incurred.
DELAY IN PAYMENT?
The submission was made on behalf of the Husband that I should make an order that costs are only payable upon the making of final orders that provide for the discharge of various restraints on the Husband, made by orders made 26 April 2023. In the substantive proceedings, directions have been made for the filing of written submissions to be completed by the end of February, and so a judgment is likely at least several months away.
I do not have any evidence before me that the Husband only has available to him the assets and income which, pursuant to Orders 1, 4 and 11 of the 26 April 2023 orders, he is restrained from dealing with other than in certain ways. If no agreement is reached, then costs will need to be assessed. That process will start within 14 days of the making of these orders, and costs will be payable within a reasonable time of that assessment.
To be clear, my orders do not discharge or vary any of the orders restraining the Husband from dealing with property or income.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Behrens. Associate:
Dated: 13 February 2025
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