CIU & NAO

[2018] FamCA 288

FAMILY COURT OF AUSTRALIA

CIU & NAO [2018] FamCA 288

FAMILY LAW – COSTS – Where application for costs on an indemnity basis – Where consideration of applicable principles – Where justifying circumstances for costs order to be made – Where circumstances do not justify departure from party/party costs order.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) rr 19.08, 19.18

Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160
Bele & Vaughan (Costs) [2012] FamCAFC 198
Ciu & Nao [2016] FamCA 1037
Collins and Collins (1985) FLC 91-603
Greedy and Greedy (1982) FLC 91-250
Hawkins & Roe [2012] FamCAFC 77
Huda & Huda and Anor (Costs) [2017] FamCAFC 104
Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23
Kohan & Kohan (1993) FLC 92-340
Luadaka v Luadaka (1998) FLC 92-830
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311
Prantage & Prantage  [2013] FamCAFC 105
Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681

APPLICANT: Mr Ciu

RESPONDENT: Ms Nao

FILE NUMBER: PAC 2330 of 2016

DATE DELIVERED: 4 May 2018

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: By way of written submissions last received on 1 March 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: J R Bennett

SOLICITOR FOR THE APPLICANT: Uther Webster & Evans

COUNSEL FOR THE RESPONDENT: L Sproston

SOLICITOR FOR THE RESPONDENT: CS Lawyers

Orders

1. That the defacto wife, Ms Nao, pay the defacto husband’s costs of and incidental to his Amended Application in a Case filed on 6 October 2016 determined by orders made on 2 December 2016 and of and incidental to this Costs Application as agreed within one month of this date and in default of agreement as assessed.

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 Ciu & Nao 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 PARRAMATTA

FILE NUMBER: PAC 2330  of 2016

Mr Ciu

Applicant

And

Ms Nao

Respondent

REASONS FOR JUDGMENT

1. On 22 December 2016 in the context of ongoing property proceedings between the applicant defacto husband (Ciu) and the respondent defacto wife (Nao), the husband filed an Application in a Case seeking various interlocutory relief.

2. Orders were made following delivery of reasons for judgment on 2 December 2016 as follows:

   (1)That orders made on 15 August 2016 be discharged.

   (2)That within 7 days from the date of these orders the wife vacate the property at B Street, Suburb C and that thereafter the wife remain away from the said property and not approach or enter upon the said property except in the company of a managing agent appointed by the husband.

   (3)That upon vacating the property at B Street, Suburb C the wife be restrained from removing from that property any items of personalty other than her clothing and personal effects except with the written consent of the husband with such writing to include SMS or email communication.

   (4)That the wife is hereby restrained from approaching or contacting or communicating with all current and future employees, residents and tenants of the property at B Street, Suburb C whether by letter or email or telephone text message or any other means.

   (5)That the wife is hereby restrained from purporting to authorise and direct any current or future residents and tenants of the property at B Street, Suburb C to pay rental income to herself or any third party nominated by her.

   (6)That the wife is hereby restrained from representing to any person or entity or organisation that she has authority to undertake any action or thing on behalf of the boarding house business operated at the B Street, Suburb C property without the written consent of the husband with such writing to include SMS or email communication.

   (7)That the wife is otherwise restrained from interfering with or attempting to interfere with the ordinary operation and course of business of the boarding house enterprise operated from the property at B Street, Suburb C.

   (8)That the husband is hereby authorised and directed on behalf of the husband and wife to forthwith appoint an appropriately qualified managing agent to manage the day-to-day conduct of the boarding house enterprise conducted at the property at B Street, Suburb C including:

   (a)authorising the managing agent to deposit gross rental income for the property to the agent’s trust account;

   (b)authorising the managing agent to pay from the agent’s trust account all outgoings and expenses associated with and incidental to the operation of the business and the Suburb C property including but not limited to payments in relation to agents commission, property rates, property levies, property insurances, mortgage payments, utility bills, internet and phone bills, property taxes and costs associated with preparation and lodgement of all necessary BAS and partnership returns for the business;

   (c)authorising the managing agent commencing on 6 January 2017 and thereafter on the sixth day of each and every month to pay 50 per cent of any surplus rental income after payment of the expenses referred to above in an account nominated by the wife and 50 per cent of any such surplus rental income to an account nominated by the husband provided always that any such payment to the wife shall be not less than $2,200.00 per month with any balance then remaining then to be paid to the husband with such payments to be by way of preliminary distribution of net partnership income as determined at the end of each financial year;

   (d)authorising the managing agent to provide to the wife at the close of each relevant monthly period a copy of the management statement evidencing receipts and disbursements in relation to the boarding house business conducted at and the property at B Street, Suburb C.

   (9)That pending further order the husband and wife are restrained from withdrawing or in any way accessing funds in National Australia Bank account …70 except by joint authority of the husband and wife.

   (10)That the husband provide to the wife written notice of his intention to deal with the property at D Street, Suburb E by way of sale, mortgage or lease with that notice in any event to be given not less than one month before the formal listing of the property for sale or the entry into by the husband of any further mortgage or lease in relation to the subject property and in respect of this order the wife has liberty to apply on short notice.

   (11)That otherwise all interim applications before the Court be dismissed.

3. The background to the orders is set out in the reasons for judgment: Ciu & Nao [2016] FamCA 1037.

4. The husband filed on 22 December 2016 an application seeking an order that his costs of and incidental to the matter be paid by the wife on an indemnity basis. The wife seeks an order that the application for costs be dismissed. Neither party sought to list the costs issue and on 13 June 2017 the Registrar noted that the issue was outstanding and directed that the husband file and serve submissions by 26 July 2017 with the wife to file and serve submissions in response by 29 August 2017.

5. On 21 February 2018 the matter was listed for judicial case management and it was ordered that the husband file and serve any costs submissions in reply to those of the wife by 2 March 2018. Those submissions were received on 1 March 2018 and thereafter judgment was reserved to chambers.

Costs

1. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.

2. That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.

3. Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: Penfold v Penfold (1980) 144 CLR 311.

4. The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They relevantly, in these proceedings, relate to the following:

   (a) the financial circumstances of each of the parties to the proceedings;

   (b) whether any party has legal aid and the terms of any grant of aid;

   (c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answers, questions, admissions of facts, production of documents and similar matters;

   (d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;

   (e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g) such other matters as the Court considers relevant.

5. In Collins and Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.

6. In Greedy and Greedy (1982) FLC 91-250 and Luadaka v Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.

7. Later the Full Court in Hawkins & Roe [2012] FamCAFC 77 said:

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

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

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

   (footnotes omitted)

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

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

8. The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) which state:

19.18 Method of calculation of costs

(1)The court may order that a party is entitled to costs:

(a)of a specific amount;

(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

(c)to be calculated in accordance with the method stated in the order; or

(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

1. It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at 162, the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.

2. In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the court said at [10] that the court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.

3. Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93-748:

   130. If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…

Indemnity Costs

1. Importantly the husband’s application seeks that the costs against the wife and/or her solicitors should be ordered on an indemnity basis. Rule 19.08 provides:

   …

   (3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.

2. Regrettably, the husband does not particularise the quantum of the order sought and as such it would be necessary for there to be an assessment of costs on whatever basis an order is made.

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

4. Provisions of the Family Law Rules 2004 (Cth) (“the Rules”), particularly rule 19.18:

19.18 Method of calculation of costs

(1)The court may order that a party is entitled to costs:

(a)of a specific amount;

(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);

(c)to be calculated in accordance with the method stated in the order; or

(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.

1. The Rule further provides, in subparagraph (3), that:

   In making an order under subrule (1), the court may consider:

   (a)the importance, complexity or difficulty of the issues;

   (b)the reasonableness of each party’s behaviour in the case;

   (c)the rates ordinarily payable to lawyers in comparable cases;

   (d)whether a lawyer’s conduct has been improper or unreasonable;

   (e)the time properly spent on the case, or in complying with pre-    action procedures; and

   (f)expenses properly paid or payable.

2. The Court has jurisdiction in its discretion to make an order for costs on an indemnity basis and the purpose of such an award is to more fully or even wholly repay to a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings.

3. In Kohan & Kohan (1993) FLC 92-340 at 79,611: the Full Court recognised that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said,

   … it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.

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

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

   
   

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

   …When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.

5. The category of cases in which an award of an indemnity costs order may be appropriate are not closed and the Full Court of the Family Court observed in Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 at [31]:

   … It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such order is sought.

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

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

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

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

   (a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success.  In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397).

   (b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra)).

   (c)Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court,

   
   

   3 May 1991)).

   (d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).

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

2. More recently the Full Court has affirmed the considerations above: Prantage & Prantage [2013] FamCAFC 105. As the Full Court said in Huda & Huda and Anor (Costs) [2017] FamCAFC 104:

   10.Relevant authorities, the Act, the Rules and the settled law were fully described in Prantage & Prantage (2013) FLC 93-544. Other than to observe that the general principles applicable to indemnity costs are well known and there must be some special or unusual (sometimes described as exceptional) feature to attract such an order, it is not necessary to refer further to matters of principle. There is no doubt that an indemnity costs order is regarded a very great departure from the standard costs order (Kohan & Kohan (1993) FLC 92-340).

3. As to the relevant consideration in s117(2A):

   a)The primary proceedings are property proceedings. Both parties own assets of some significance and have recourse to significant funds. It is not contended that financial circumstances should be a bar to any order for costs.

   b)The relevant conduct of the parties is conduct as it relates to the proceedings themselves. The wife had failed to comply with previous orders to the extent that the husband was required to file his interim application. The circumstances are more fully set out in the reasons for judgment referred to above.

   c)Neither party has legal aid.

   d)The wife was put on notice as to her failure to comply with previous orders and the imminent application to seek appropriate orders.

   e)Neither party was wholly unsuccessful. However it is readily apparent that the substance of the issues was determined in favour of the husband.

4. The circumstances discussed above and more fully set out in the reasons for judgment referred to justify a departure from the general rule as to costs but do not justify an order for indemnity costs where such an order is a “very great departure from the standard costs order”.

5. There will be an order that the wife pay the wife’s costs as agreed or assessed on a party/party basis.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 4 May 2018.

Associate: 

Date:  4 May 2018