Chou and Wao - [2019] FamCA 269

FAMILY COURT OF AUSTRALIA

CHOU & WAO

[2019] FamCA 269

FAMILY LAW – COSTS – Application for fixed sum costs – Parties’ financial circumstances considered – Where the husband’s conduct during the course of the proceedings caused the wife to incur unnecessary costs – Where the husband unreasonably failed to accept offers of settlement – Where the husband was given notice of the wife’s intention to recover costs on an indemnity basis in the event of her offers being rejected - Where the husband was wholly unsuccessful in his application – Costs ordered.

Family Law Act 1975 (Cth) s. 117
Federal Court of Australia Act 1976 (Cth) s. 37M(1)
Family Law Rules 2004 (Cth), rr. 1.04, 19.18

Cross & Beaumont (2008) 39 Fam LR 389
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123
Hawkins & Roe (2012) 47 Fam LR 526
Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108
Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311
Sklavos v Australasian College of Dermatologists [2013] FCA 1065
Stoian & Fiening (Costs) [2014] FamCA 944

APPLICANT:

Ms Chou

RESPONDENT:

Mr Wao

FILE NUMBER:

PAC

1883

2016

DATE DELIVERED:

2 May 2019

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

McClelland J

HEARING DATE:

15 March 2019

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Atunes Lawyers

SOLICITOR FOR THE RESPONDENT:

Self-represented

Orders

The husband pay the costs of the wife as a lump sum in the amount of $130,000, within 28 days.

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 Chou & Wao 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: PAC 1883 of 2016

Ms Chou

Applicant

And

Mr Wao

Respondent

REASONS FOR JUDGMENT

Introduction

This matter concerns an application for costs filed by the wife, Ms Chou (“the wife”) on 16 November 2018. The wife has sought costs in respect to the dismissal of an Initiating Application filed by the husband, Mr Wao (“the husband”) on 30 April 2016, and amended on 13 December 2016 and 3 October 2017. Most significantly, the husband’s application included a proposed order to set aside a binding financial agreement (“BFA”).
The hearing of the husband’s application proceeded over three days, from 27 to 29 June 2018, and judgement was delivered on 24 July 2018. The basis for the dismissal of the husband’s application is as set out in my Reasons for Judgment delivered on that date.

The wife’s application

In her Application in a Case file don 16 November 2018, the wife seeks the following orders:
1. That within 42 days of the date of these Orders the Respondent Husband pay the costs of the Applicant Wife fixed in the sum of $130,000.
2. In the alternative to Order 1, the Respondent Husband pay the costs of the Applicant Wife on a party/party basis as agreed or assessed.
3. Such further or other order as the court deems fit.

Relevant documents

At the hearing, the wife relied upon the following documents:
a)Her Affidavit filed on 16 November 2018; and
b)Affidavit of Ms D filed on 14 February 2019.
The husband relied upon his Affidavit filed on 15 March 2019, together with additional documents which he tendered at the hearing.

Relevant law

Section 117 of the Family Law Act 1975 (Cth) (“the Act”) sets out the basis upon which the Court is empowered to make an order for costs. Relevant to these proceedings are the first three sub-sections of s 117, which are, as follows:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the Court is of opinion that there are circumstances that justify it in doing so, the Court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the Court considers just.
(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.
Those provisions make clear that, while the general rule in family law proceedings is that each party bears his or her own costs, the Court may order a party to pay the costs of another where there are circumstances justifying the making of such an order.
As such, a litigant seeking a costs order must establish that the justice of the case requires an order for costs by reference to the non-exhaustive list of statutory considerations set out in s 117, before such an order is made. Although the applicant for costs must establish circumstances which would justify such an order, it is not the case that a costs order can only be made in, what has been described as, “a clear case”: Penfold v Penfold (1980) 144 CLR 311 at 315.
The considerations set out in s 117(2A) must be taken into account in deciding whether or not to order a party to pay the costs of another. However, there is “nothing to prevent any factor being the sole foundation for an order for costs” being made: Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at 130.

Consideration

In respect to s 117(2A)(a), I note that the wife has detailed her financial circumstances at paragraphs 21 to 23 of her Affidavit. By way of summary, those circumstances are:
a)The wife is in receipt of social security benefits of $277 per week;
b)The wife will qualify for the old age pension on 23 October 2019, when she reaches the age of 65 years;
c)The wife receives some financial assistance from her three children who, in total, contribute approximately $264 per week for household expenses;
d)The wife has also incurred expenses relevant to the maintenance of her home. In 2018, she spent approximately $85,000 on renovations and repairs relating to water damage;
e)The wife has savings of approximately $69,484; and
f)As result of the substantive proceedings commenced and pursued by the husband, the wife has a debt of $96,800, which she has borrowed from family and friends.
It is difficult to decipher the husband’s current financial circumstances because he has failed to produce documents during the course of the proceedings relevant to his income and property, despite a request for disclosure having been made on 7 May 2018. That request is annexed to the wife’s Affidavit.
In terms of the information that is available, a Financial Statement filed by the husband on 22 September 2017 disclosed that the husband:
a)Received an income from a business called Company T (City G) of $670 per week and had a $5,000 interest in that business;
b)Had weekly expenses of $633;
c)Owed legal fees of $23,456.74;
d)Had funds in banks of $31,800 and cash of $10,000;
e)Owned two cars estimated to be worth approximately $6,500; and
f)Had superannuation of $72,000.
At the hearing of the costs application, the husband tendered a document dated 5 October 2018, indicating that the company “Company T” has been deregistered (Exhibit “A”). He also tendered a document which, he says, indicates that that company owes $169,200 in respect to rental expenses incurred for the period from 1 January 2015 to 1 January 2018 (Exhibit “B”).
While I am not in a position to determine the husband’s financial circumstances, I accept that he will have some financial difficulties in meeting an order for costs. However, in Cross & Beaumont (2008) 39 Fam LR 389 at [60], the Full Court held that financial incapacity to pay a costs order is not a barrier where the conduct of the party may warrant the making of such an order. In the circumstances of this case, which will be set out, I am satisfied that such an order should be made.
In respect to s 117(2A)(c), the wife was critical of the manner in which the husband conducted his case, which, she contended, resulted in her incurring unnecessary legal fees. Most relevantly, at the final hearing of this matter, the husband abandoned a number of his contentions. The wife, justifiably, in my view, argues that the husband’s failure to abandon those contentions at an earlier date resulted in her incurring unnecessary costs.
In respect to s 117(2A)(e), the husband was wholly unsuccessful in the proceedings. In that regard, I accept that the mere fact that a case is wholly unsuccessful is not a justification for ordering that a party pay the costs of the other. As Thackray J (in dissent) said in Hawkins & Roe (2012) 47 Fam LR 526: “[E]ven a meritorious case can be “unsuccessful” when the other case is found to have greater merit”. However, it is significant that in dismissing the husband’s application, in my decision dated 24 July 2018, I found that there were a number of aspects of the husband’s evidence that lacked credibility (see paragraphs [37] to [45]). The father’s agitation of his case on the basis of false factual premises put the wife to unnecessary expense.
In terms of s 117(2A)(f), it is of significance that the solicitors for the wife made several offers to the husband in an attempt to resolve this matter. Those offers included that:
a)On 16 February 2017, the wife offered the husband $100,000 to settle the proceedings, which offer included that there be a declaration that the relevant financial agreement between the parties was binding. That offer indicated that, if the husband did not accept the offer, the letter would be tendered in an application for costs on an indemnity basis. A copy of the letter is exhibited to the wife’s Affidavit; and
b)On 12 July 2017, the wife offered the husband $70,000 to settle the proceedings on a similar basis. That offer indicated that, if the husband did not accept the offer, the letter would be tendered in an application for costs on an indemnity basis. A copy of that letter is also exhibited to the wife’s Affidavit.
The wife’s legal fees at 12 July 2017 totalled $22,539.37. As a result of the husband’s failure to accept that offer, the wife incurred an additional $158,692.26 in legal fees, bringing her total legal fees and disbursements to $181,231.63.
Having regard to those considerations, I am satisfied that the wife has established a proper basis for an award of costs in her favour, pursuant to s 117 of the Act. The question, therefore, becomes what those costs should be and, in particular, whether an order should be made that they be paid in a lump sum, as sought by the wife.
In considering what order to make, I have had regard to the fact that parties to proceedings before the Family Court are obligated to conduct themselves in accordance with the main purpose of the Family Law Rules 2004 (Cth) (“the Rules”), as set out at r 1.04, as follows:
The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
Rule 1.04 is consistent with the obligation of parties and practitioners, under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”). Specifically, s 37M(1) of the Federal Court Act provides:
The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
There is an obligation, under those principles, to not unreasonably fail to accept an offer to resolve a matter in dispute. This is made clear by Greenwood J in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108, where his Honour said, at [94], that this requires a party to “carefully assess all the material … to determine and confront the strengths and weaknesses of their case”.
As stated by Jagot J in Sklavos v Australasian College of Dermatologists [2013] FCA 1065 at [35]:
These provisions are not merely exhortatory. The duty is real and can be enforced, if necessary, by appropriate costs orders.
This Court takes seriously the obligations placed on parties to make a genuine attempt to achieve a resolution of matters in dispute in order to avoid litigants incurring additional costs. Consistent with that obligation, s 117(2A)(f) specifically requires the Court to consider “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”. As observed in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725, in respect to similar provision requiring the Court to have regard to whether a settlement offer had been made, such a provision adds a “duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation”.
In this matter, in failing to accept the reasonable offers made the wife, the husband has not made a genuine attempt to resolve the matters in dispute between the parties. Having received notice that the wife would seek an order for indemnity costs in the event that he was unsuccessful in his case, the husband rejected the wife’s offers at his own peril, in terms of potential liability for the wife’s costs.
Having regard to the formal offers of settlement made by the wife on 16 February 2017 and 12 July 2017, including the provision of notice that she would apply for an order for costs on an indemnity basis in the event of the husband rejecting the offers and subsequently being unsuccessful in his application, it is appropriate to require the husband to pay the wife’s legal costs and disbursements actually incurred, subsequent to the date of that first offer of settlement.
I note that the legal costs incurred subsequent to 16 February 2017 total $156,602. The wife has sought an order that the husband pay her costs to the extent of $130,000, which, she states, is 71 per cent of the total legal costs she has incurred, being $181,231.63.

Lump sum costs

Rule 19.18 of the Rules provides for the methods of calculating costs. These include, in r 19.18(1)(a), the Court fixing upon a specific amount for costs or, in r 19.18(1)(b), an order for the costs to be assessed on a particular basis: Stoian & Fiening (Costs) [2014] FamCA 944 at [82].
In Stoian & Flemming (Costs) [2014] FamCA 944 at [91], Kent J endorsed the principles relevant to the application of s 98(4)(c) of the Civil Procedure Act 2005 (NSW), as adumbrated by Einstein J in Idoport Pty Ltd v National Australia Bank Limited & Ors [2007] NSWSC 23, stating it was “similar” to r 19.18. Those principles are:
i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation;
ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable;
iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available;
iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place;
v. the gross sum “can only be fixed broadly having regard to the information before the Court” … [References omitted].
In Parke & the Estate of the Late A Parke (2016) FLC 93-748 at 81,944, Murphy J, after referring to a number of authorities, held that:
If the court is to fix a sum [in respect to cost] it should be “fixed broadly having regard to the information before the court” and, in that respect, the process does not “by its very nature – and usage that a process similar to that involved in a traditional taxation or assessment of costs should take place.
In that regard, r 19.18(3) provides that “in making an order under subrule (1) the court may consider a number of factors” including in r 19.18(3)(b), “the reasonableness of each party’s behaviour in the case”.
In this matter, it was, in my view, unreasonable for the husband to have rejected the wife’s offers of settlement. He had enough information, at that point in time, to realistically assess his prospects of success. The wife’s offers specifically stated that, in the event of her offer being rejected, she would seek an order for costs on an indemnity basis. As result of that notice provided by the wife, I would have awarded costs in this matter on an indemnity basis in respect to costs incurred by the wife in the period subsequent to 16 February 2017, being $156,602. In circumstances where the wife has sought costs of a lesser sum, being $130,000, I propose to make an order in the wife’s favour for that sum and for the amount to be paid by way of lump sum.

Orders

Accordingly, I will order that the husband pay the wife’s costs of $130,000, as a lump sum, within 28 days.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice McClelland delivered on 2 May 2019.

Associate:

Date: 2 May 2019