Claringbold and James (Costs)

[2008] FamCA 57

FAMILY COURT OF AUSTRALIA

CLARINGBOLD & JAMES (COSTS) [2008] FamCA 57

FAMILY LAW – COSTS – conduct of the parties to the proceedings – the effect of 117AB(1)

Family Law Act 1975 (Cth)
Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth)
Family Law Rules 2004

In the Marriage of Kohn (1977) 30 FLR 175
LAC and TRF and LKL [2005] Fam CA 158
Brown & Brown (1998) FLC 92-822
Pension & Pension (No 2) (2005) FMCAfam 22
R & Q [2005] FamCA 6
Arundle Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) HCA 26

APPLICANT: Ms Claringbold

RESPONDENT: Mr James

INDEPENDENT CHILDREN’S LAWYER: Donald S Lampe

FILE NUMBER: DGF 572 of 2001

DATE DELIVERED: 8 February 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: Written Submissions

REPRESENTATION

THE APPLICANT: In Person

COUNSEL FOR THE RESPONDENT: Mr Fronistas

SOLICITOR FOR THE RESPONDENT: Kyrou Lawyers

INDEPENDENT CHILDREN’S LAWYER COUNSEL: Mr R Curtain

INDEPENDENT CHILDREN’S LAWYER SOLICITOR: Donald S Lampe

Orders

1. That the husband pay and be solely responsible for the witness’ expenses of Senior Constable EA to attend court and give evidence on 26 July 2007 and, if the independent children’s lawyer has already paid those expenses, the husband reimburse the independent children’s lawyer for same within

   
   

   14 days. 

2. That the wife make a contribution to the costs of the husband as follows:-

   (a)50% of the costs of the trial which was conducted on 16 to 30 July inclusive and on 2 August 2007;

   (b)20% of the husband’s costs of these proceedings (including reserved costs but not including the trial costs) initiated by the wife by her application filed in the Federal Magistrates Court on 2 November 2005;

   (c)the costs of the husband’s application for costs.

3. That the costs payable by the wife be assessed on a party/party basis.

4. That unless by 18 February 2008 the parties are agreed as to the quantum of costs payable by the wife to the husband in accordance with this Order, the parties attend a costs settlement conference to be convened by Registrar Riddiford on 16 April 2008 at 9:15am and as provided in Rule 19.28 of the Rules.

5. That if the parties do agree as to the quantum of costs payable by the wife to the husband in accordance with this Order, the solicitors for the husband notify Registrar Riddiford in writing by 18 February 2008.

6. That pending payment of said costs and the $855 ordered to be paid by the wife to the independent children’s lawyer on 10 May 2007, paragraph 9 of the Orders made on 16 October 2007, pursuant to which the wife is restrained from causing, permitting or suffering her interest the estate of her late father to be surrendered, continue in full force and effect.

7. That the applicant direct the Insolvency and Trustee Service not to distribute any monies to her until all current creditors pursuant to Bankruptcy reference …  are paid and there has also been paid:-

   (a)the amount at which the wife’s liability for costs has been assessed is paid to the Respondent’s lawyers, Kyrou Lawyers, of … , and

   (b)the amount of $855 has been paid to the independent children’s lawyer, Donald Lampe of … . 

8. That the applicant provide forthwith to the insolvency and trustee service an irrevocable authority stating that the Insolvency and Trustee Service pay:-

   (a)The husband the amount of his assessed costs from the bankrupt estate of the applicant;

   (b)Donald Lampe the sum of $855 –

   and that a copy of the said irrevocable authority and served upon the solicitors for the respondent. 

9. That the applicant authorise Mr C Claringbold to provide the solicitors for the respondent details as to the progress of liquidating the assets of the estate of the late Mr A Claringbold, including providing copy documents of sale of the M property, and details of the purchaser and settlement date and settlement statement. 

10. That the applicant direct Mr C Claringbold of …, NSW to forward to the Insolvency and Trustee Service any amounts due to her as a beneficiary of the estate of the late Mr A Claringbold. 

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Bennett delivered this day will for all publication and reporting purposes be referred to as Claringbold & James (Costs). 

FAMILY COURT OF AUSTRALIA AT

FILE NUMBER: DGF 572 of 2001

Ms Claringbold

Applicant

And

Mr James

Respondent

And

Independent Children’s Lawyer

REASONS FOR JUDGMENT

Introduction

1. For two weeks commencing 16 July 2007 I heard proceedings arising out of a parenting application in relation to a daughter born in December 1998.  On 2 August 2007 I pronounced final orders.  I published my reasons for decision on 3 September 2007.  My orders included:-

   [27]. That any application for costs be made in writing and communicated to my Associate within 14 days.

2. By letter dated 16 August 2007 from the solicitors for the husband, my Associate was notified that the husband sought costs including reserved costs against the wife.  On 10 August 2007 the independent children’s lawyer wrote to my Associate advising that he seeks costs orders against both the husband and the wife.  My Associate received notification that the husband and the independent children’s lawyer each sought costs against the wife and that the independent children’s lawyer also sought some limited costs against the husband.  The matter was relisted accordingly.  

3. On 16 October 2007 I made the following orders:-

   IT IS ORDERED:

   [1]. That by 11am on 17 October 2007 the mother send by facsimile to office of the independent children’s lawyer, Mr Lampe, facsimile number […], a copy of the following documents or things:-

   (a) Correspondence from the mother’s bankruptcy trustee from which the name and professional address of the trustee and reference applicable to the mother is evident;

   (b) Correspondence from the solicitor who is the co-trustee of the estate of the mother’s late father showing his/her professional name and address;

   (c) A copy of the mother’s late father’s last will and testament.

   [2]. That correspondence referred to the preceding paragraph of this Order is not intended to include the text of any communication but is to be provided merely so that the bankruptcy trustee and the trustee of the estate of the mother’s late father can be identified and, to that end, the mother is at liberty to obscure the text in the correspondence.

   [3]. That upon receiving the documents referred to in paragraph 1

   
   

   Mr Lampe cause a copy thereof to be sent to Kyrou Lawyers, solicitors for the husband as soon as practicable.

   [4]. That by 4pm on 30 October 2007 the husband file and serve any written submissions upon which he relies in respect of his application that the mother pay all or part of the costs of the completed proceedings which are estimated in the sum of $155,947.83 and such submissions include details of how those costs are calculated.

   [5]. That by not later than 16 November 2007 the respondent mother file and serve any written submissions upon which she relies in opposition to the cost order sought by the husband.

   [6]. That the written submissions of both parties in relation to costs include submissions in relation to the mechanics of how any cost order if made ought be implemented having regard to the mother’s status as an undischarged bankrupt whose principal asset is the balance of an entitlement under the estate of her late father which estate may not yet be finalised.

   [7]. That without limiting the foregoing the independent children’s lawyer and the solicitors for the husband are at liberty to make such enquiries of Samantha Ward or Christine Thomas, as they reasonably consider are necessary to ascertain the mechanics by which any costs order can be met, noting that Samantha Ward is a principal creditor in the bankruptcy and the mother has informed the Court that Christine Thomas currently has carriage of the mother’s financial affairs.

   [8]. That the court certifies that it was reasonable for the parties to employ an advocate.

   [9]. That until further order the mother be and is hereby restrained from causing, permitting or suffering her interest the estate of her late father to be surrendered.

   AND THE COURT NOTES that the mother has this day informed the Court, the independent children’s lawyer and the husband that she does not propose to exercise her rights to spend time with the child [A] born … December 1998 pursuant to paragraph 4(a)(i) – (iv) & 6 of the Orders made on 3 September 2007 and in the future will confine herself to telephone communication on Wednesdays and Sundays pursuant to paragraph 4(v) and I DIRECT that a copy of this Order be provide to the section 65L family consultant assigned to this matter.

4. As was discussed on 16 October 2007, the costs sought by the independent children’s lawyer against the wife in the sum of $855 (being the fee payable to Dr M for his second assessment of the wife) have already been the subject of an order by me, made 10 May 2007.  The independent children’s lawyer really seeks an enforcement of that earlier order.  In the absence of any submission to the contrary, I will make orders which provide for those monies to be paid from monies to which the wife is entitled from the estate of her later father. 

5. The independent children’s lawyer also sought costs against the husband to cover the witness expenses of SC A who was required for cross examination by the husband.  I accept that neither the independent children’s lawyer nor the wife required Senior Constable EA for cross examination.  Having regard to the evidence given, it is appropriate that the husband pay the costs of the Senior Constable’s attendance at court.  That is not to include any costs attributable to the production of copy documents which were earlier sent to the court also in compliance with the subpoena issued at the behest of the independent children’s lawyer. 

6. The husband’s submissions were filed on 31 October 2007.  That is one day later than they should have been filed.  The wife does not take issue with the late filing of the husband’s submissions.  The wife’s submissions were filed on 16 November 2007 which was within the time I ordered.  The wife asserts, amongst other things, that she cannot respond “to any comments about Reasons for Judgement of the Honourable Justice Bennett dated 3 September 2007 … because I have not seen them or even been aware they had been handed down.”  The court file contains correspondence indicating that the reasons were sent by pre-paid post to the wife (and all other parties) on 7 September 2007 at her address for service.  In any event the wife has had since early November 2007 to obtain a copy of the reasons, by request to my Associate or by attending at the Court.  She has chosen not to do so.  I should mention that the wife’s submissions contain some irrelevant material.  I disregard that material.  There is also some material which refers to facts not in evidence before me which is also irrelevant.  For the avoidance of doubt, I have disregarded that material. 

7. I will treat the submissions as having been regularly received and for the wife having had an adequate opportunity to obtain my reasons for judgment to which the applicant for costs made reference in his submissions.  

8. In addition to the submissions to which I have referred there was a letter of

   
   1 November 2007

   addressed to my Associate from Christine Thomas lawyers who is a previous solicitor of the wife to whom the wife still owes money.  

   
   

   I have read the document but do not regard the contents of it to be of any assistance to either party.  Its contents do not figure in my consideration of the costs dispute.  Finally, there is a submission which was received from the husband’s lawyers under cover of a letter dated 22 November 2007 which are from counsel for the husband, Mr Fronistas, and expressed to be “in relation to false allegations made by the applicant in her submissions dated 16 November 2007.”  I have read this document but will not have regard to its contents in my determination of the costs dispute.  The husband has no right of reply to the wife’s costs submissions (and did not seek any at the time I formulated the timetable) but, most importantly, it does not raise relevant matters. 

9. Section 117 of the Family Law Act1975 contains the general rule that each party to proceedings under the Act shall bear his or her own costs.  The object of the rule is to ensure that spouses are not deterred from bringing or maintaining legitimate applications for fear of incurring an intolerable financial burden if they lose.[1]  However, the Court retains a discretion to make an order for costs if it is of the opinion there are circumstances that justify that course and it would be just to do so. 

   [1]  In the Marriage of Kohn (1977) 30 FLR 175 at 177.

10. In considering whether to make an order the Court must have regard to the matters set out in s 117(2A). The weight to be attached to any of the considerations in sub-s (2A) is wholly discretionary. However, while no single factor out-ranks any other, there is nothing to prevent one or other of them from being the sole foundation for a costs order.[2]  As Kay J observed in Brown & Brown[3]:

    "In many cases there will be an outstanding feature . . . that makes an order for costs appropriate, a feature which so dominates the scene that it can outweigh any of the other s 117(2A) considerations".

    [2]  LAC and TRF and LKL [2005] FamCA 158 at [41].

    [3] (1998) FLC 92-822 at 85,347.

11. The applicant for costs contends that this application raises the matters in paragraphs 117(2A)(a), (c), (e) and (g).  They are:-

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

    (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; 

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

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

12. The applicant submits that s 117AB(1) is also relevant. It provides:-

    (1)  This section applies if:

    (a)  proceedings under this Act are brought before a court; and

    (b)  the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.

    (2)  The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings

13. As was commented by Brown FM, in the matter of Pension & Pension (No 2) (2005) FMCAfam 22:

    The husband was entitled to seek an adjudication of the competing applications from the court.  However, the efficient administration of justice, particularly in family law matters, relies on the parties concerned and their legal representatives making a bona fide attempt to resolve the matters in dispute between them.  This is particularly so where the costs of the litigation involved grow to a point where they are out of proportion to the magnitude of the issues involved.  

14. The learned Federal Magistrate goes on to observe:-

    The outcome of any litigation which hinges on the exercise of discretion cannot be predicted with complete certainty.  That is a truism.  However, in assessing the degree of uncertainty and outcome the parties cannot allow themselves to lose sight of the magnitude of the issues at stake when set against the possible costs involved.

15. The above sentiments apply to all courts in the family law system.  In this case, the issue at stake was where the child should live and the duration and regularity of the time she spend with the parent with whom she does not live most of the time.  It is difficult to overestimate the importance of that issue to each of the parents.  The child had lived with the wife for all her life.  The orders sought (and obtained) by the husband had the effect of reversing a long standing status quo.  These are not proceedings where the wife could be expected to take shortcuts and it was certainly the entitlement of each parents and the independent children’s lawyer to test the evidence of experts such as the family consultant and the psychiatrist who assessed the husband (once) and the wife (twice).  However, it was not open to the wife to maintain false denials which had the effect of unnecessarily protracting the court proceedings.  

16. As indicated, the husband seeks costs in the sum of $155,947.83 which are costs itemised and then claimed on an indemnity basis.

17. I will turn first to whether or not there are circumstances in this case which satisfy me that a costs order against the wife is justified.

Financial circumstances of the parties (s 117(2A)(a))

1. I am satisfied that neither parent can afford the legal expenses associated with these proceedings.  

2. The husband’s submissions assert that he has a modest income which was about $31,500 per annum in the financial year ending 30 June 2006.  He is married to Mrs James and shares some expenses with Mrs James.  He is jointly registered as a proprietor of the property at which he and Mrs James live.  It has a rateable value of $215,000 and is subject to a mortgage of $130,861.  His car is encumbered and repayments are about $60 per week.  He and Mrs James have sold another property and retired some debt including $11,000 owing in legal expenses for proceedings about the child which were settled before Joske J in 2004 and some $64,612 of legal costs to his solicitors on account of professional costs for these proceedings. 

3. The husband’s current debts include the balance of $91,335.52 to his lawyers for these proceedings and $10,743 to Capital Finance.  I do not know if his wife is jointly liable for the Capital Finance debt but it does not much matter.  The husband’s financial position is very modest.  He has the full time care of the child. 

4. I accept the husband’s submissions in relation to his financial circumstances.  

5. The wife is dependent on a New Start Allowance.  She was made bankrupt on

   
   9 November 2005

   over unpaid legal fees for the 2004 proceedings in this court.  The unsecured creditors are her previous solicitors, Samantha Ward Pty Ltd, in the sum of $11,899.57 and $2,030.18 on a credit card.  Since her bankruptcy, and not included in her bankruptcy, are certain debts including $15,500 or thereabouts to a solicitor who has acted for the wife in the early part of these proceedings, Christine Thomas. 

6. The wife’s asset is essentially her interest as beneficiary in the estate of her later father.  The main asset of the estate is at the M property in respect of which the wife gave evidence that there have been attempts to sell but it is not yet sold.  Her entitlement is described by the husband as being $80,000 to $90,000.  The wife does not take issue with that in her description.  From that there must be deducted the monies owing to Christine Thomas, in respect of which Ms Thomas holds an irrevocable authority to the trustee for payment.  That leaves an equity in the vicinity of $70,000.  The wife’s position is modest but stronger than the husband’s by virtue of her not owing significant legal costs of the trial. 

Conduct of the parties in relation to the proceedings (s 117(2A)(c))

1. The husband contends that the following conduct of the wife justifies an order for costs:-

   a)That she gave false evidence as described by me in paragraphs 37, 42, 45, 51 and 200 of my reasons for decision[4];

   b)That she gave incorrect information to experts such as Dr M and the family consultant which prolonged the evidence that each professional was required to give;

   c)That she falsely maintained denials of events which required the husband to call witnesses such as Senior Constables G and K whose evidence made it clear that the denials of events were false and which prolonged the trial.  Likewise the independent children’s lawyer called Senior Constable FS to the same effect;

   d)That the wife called evidence from her domestic violence support worker and her psychologist which prolonged the trial and did not assist her case.

   [4] [2007] FamCA 1032

1. The wife submits that it was the husband’s choice to call evidence in relation to the events of 11 November and 15 December 2006.  I do not accept that submission.  The incidents were significant and the husband was not present at either.  The husband held information which the wife denied.  It was incumbent upon him to adduce admissible evidence and he did so. 

2. The wife contends that she “did not deny domestic violence by [Mr S], I stated I had taken care of it.”  I do not accept the wife’s contention.  Sure enough during the trial she referred to having “taken care of it” but in her sworn material she denied any violence at all as is extracted at paragraph 39 of my reasons for judgment.  That includes the wife’s statement, sworn on

   
   13 December 2006

   which was a month after a seriously violent incident between herself and her boyfriend, that:-

   I deny that there is any domestic violence between [Mr S] and I.  Our relationship is mutually supportive and stable. 

3. The husband submits that trial time was wasted because the wife failed to agree to, or to take issue with, prior to the hearing a chronology prepared by the independent children’s lawyer.  The wife relies on my finding that cross examination by the counsel for the husband was often repetitive or overly time consuming.  I found the wife to be reasonably well organised.  Time was spent on ascertaining to what extent the wife agreed with the outline prepared by the independent children’s lawyer but that process served a number of other purposes and is not something which I am satisfied justifies an order for costs alone or with other matters.  I remain of the view that the husband’s case was conducted slowly. 

4. The above comments relate to the trial.  However, I also take into account the conduct of the parties in the proceedings prior to trial.  During my pre-trial management of the matter, the husband declined to be psychiatrically assessed and did not avail himself of the opportunity to file expert evidence in that regard by 14 February 2007 (as ordered by Brown J on 15 December 2006).  However, when the matter came before me on 26 February 2007 he sought a further opportunity to be psychiatrically assessed and subsequently was assessed and the evidence in that regard was significant to the outcome of the case.  I am satisfied that some further costs were incurred as a result of the delay in the husband submitting to an assessment. 

5. This factor strongly justifies the husband being able to recover some of his costs from the wife.  However, I am satisfied that the wife’s conduct during the trial justifies a greater proportional contribution than does her conduct prior to trial. 

Whether any party has been wholly unsuccessful (s 117(2A)(e))

1. I accept the husband’s contention that the wife was wholly unsuccessful in these proceedings.  This is supportive of an order for costs being made in favour of the husband.  

Other relevant matters (s 117(2A)(g))

1. The husband submits that the wife “has committed perjury in these proceedings”[5] and lied to various professional or expert witnesses.  I have already taken those matters into account.  The husband is critical of the wife for not having agreed to unsupervised time and for having made and maintained sexual abuse allegations which were not capable of being substantiated and for a number of other matters.  The wife rejects the contentions. 

   [5]Husband’s costs submissions filed 31 October 2007, page 10

2. Deficiencies in the wife’s parenting were not capable of being fixed by extra or unsupervised time between the husband and the child.  Much of what the husband criticises about the wife’s conduct is her conduct as a parent rather than as a litigant.  The manner in which the wife discharged (or failed to discharge) her parental responsibilities figured very significantly in my decision to change a long standing status quo and to require the child to live with the husband.  I have already taken into account the fact that the wife has been wholly unsuccessful.  The husband’s submissions do not enhance his costs application but neither do they detract from it. 

3. The wife contends that the husband should not have employed solicitors and run up such a huge legal bill if he did not have the means and ability to pay and so, inferentially, she should not have to contribute to those costs.  I do not accept that submission.  Litigants have as much of a right to be represented by appropriately qualified persons as they do to run the litigation themselves.  The scale of costs and basis for any departure from costs calculated at scale are in place to safeguard against excesses.  

Section 117AB(2)

1. This provision, extracted above, provides that a court must order a party to pay some or all of the costs of another party to the proceedings where the court is satisfied that that party made a false allegation or statement in the proceedings, was inserted into the current legislation by the Family Law Amendment (Shared Parental Responsibility) Act 2006 which came into operation on 1 July 2006.  The section itself has the effect of focussing the mind on the costs implications of allegations of family violence and abuse which can be easily made but, when false, are still difficult and costly to refute.  

2. I am satisfied to the required standard, which is on a balance of probabilities, that the wife knowingly made false statements about her relationship with Mr S and the domestic violence within that relationship. However, I have already taken the time and costs implications of those false statements and false denials into account in my consideration of s 117(2A)(c) above.

   
   

   I give weight to the fact that the wife maintained her denial of certain events which were ultimately proved to the court to have occurred pretty much as the husband alleged and that she otherwise lied expressly or by omission and

   
   

   I have done so in my consideration of the conduct of the parties to the proceedings as well as pursuant to my obligation under s 117AB. 

Is a costs order justified?

1. I am satisfied that the circumstances of this case justify the wife making a significant and meaningful contribution to the husband’s legal costs. 

2. I find that the wife’s conduct is the most significant of all the factors relevant to this case.  I estimate that not less than one half of the trial time can be attributed to adducing evidence which demonstrated that evidence given or statements made by the wife were false.  My assessment of the financial circumstances of the parties leads me to conclude that the husband is struggling financially but that a costs order could deprive the wife of the balance of her entitlement to the estate of her late father.

3. Taking all of the relevant factors into account, I am satisfied that the wife should pay one half of the costs of the 10 days of hearing but only 20% of the husband’s other costs of the proceedings.

Indemnity costs

1. The husband seeks that costs be calculated on an indemnity basis.  The husband’s response filed on 29 November 2005 seeks an order in those terms so I am satisfied that, at least since then, the wife has been on notice of what the husband seeks. 

2. The wife did not direct submissions in opposition to costs being calculated on an indemnity basis although I have regard here to the wife’s earlier contention that the husband should not have agreed to pay costs he could not afford to meet.  

3. I am not informed of the difference to the husband of recovering costs on an indemnity basis rather than the usual party/party basis. It is not only whether certain matters can be included but also the rate at which eligible items can be charged. The costs agreement which the husband entered into with his lawyer provides for an hourly rate of $250 payable to counsel and to the solicitor. According to the itemised scale of costs in Schedule 3 to the Family Law Rules 2004, since 1 July 2006, the hourly rate for a lawyer has been $192.90 and the hourly rate for counsel to work in chambers or to confer has been $221.55 to $315.90 per hour. 

4. The relevant authorities on the imposition of indemnity costs are usefully set out in the decision of Full Court of the Family Court of R & Q [2005] FamCA 6, delivered on 6 January 2005. At paragraph 37 the court comprising Holden, May and Strickland JJ commented:-.

   [37]. The category of cases in which it would be appropriate to make an order for indemnity costs was recently discussed by the Full Court in JEL and DDF (No. 2) (2001) FLC 93-083 at 88,441-442, where the Full Court said:

   "… The category of cases in which it would be appropriate to make an order for indemnity costs does not appear to have been fully defined. The Full Court has, however, set out some general principles. In Kohan and Kohan (1993) FLC 92-340 the Court said at 79,614:

   “The Proper Exercise of the Discretion

   The intent of s117(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) (supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v Union Insurance Co (1991) 25 NSWLR at 368 to 370.”

   63. The principles that emerge from the authorities were conveniently summarised by Sheppard J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225. His Honour in that case summarised the position as follows:

   “…

   2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis… .

   3. This has been the settled practice for centuries in England.  It is a practice that is entrenched in Australia.  Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it… .

   4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis.  The circumstances of the case must be such as to warrant the Court in departing from the usual course… .”

   64. His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis.  His Honour said at 233:

   “Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance 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 (supra)); 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 Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”

   65. Insofar as an imprudent refusal of an offer to compromise is concerned, the authorities giving rise to this proposition are in the main New South Wales authorities.  The Full Court warned in Kohan (supra), that this is in part attributable to the amendment of the Supreme Court rules of that State which provide for indemnity costs where a plaintiff obtains judgment in terms no less favourable than those of an offer to compromise made by him and not accepted by the defendant.

   66. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 the Full Court specifically acknowledged the category of cases that may give rise to an indemnity order are not closed. The Court said at 87,471:

   “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. All that is required is that the Court asked to exercise the discretion be satisfied that some ‘particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis’: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.”

   67. In his written submissions, counsel primarily relies upon the assertion that the wife imprudently refused an offer to compromise.

   68. We accept the proposition that the objective of the statutory provision in relation to written offers is to encourage settlements and to reduce the cost of litigation to the parties and the community.  That, however, does not mean that the failure to accept an offer will necessarily result in an order for indemnity costs.

   69. As the Full Court said in Kohan (supra):

   “Insofar as an unaccepted offer of compromise which exceeds a judgment may justify an order for costs, the general practice in this jurisdiction so far has been to order no more than costs on a party and party basis. Even in cases where there has been dishonest concealment of assets or income as in Penfold v Penfold (1980) FLC 90-800 and Oriolo and Oriolo (1985) FLC 91-653, no more than party and party costs have been awarded.”

   70. In our opinion, the failure to accept an offer which in retrospect, perhaps, should have been accepted is without more, insufficient to justify the making of a costs order on an indemnity basis.  The rejection of the offer must be at the very least imprudent.  We express no opinion as to when the rejection of an offer may be so classified.  It is clear to us in the circumstances of this case that the rejection of the offer, although unwise in retrospect was not imprudent."”

5. With respect, I adopt that as an accurate statement of the law in relation to solicitor / client and/or indemnity costs. 

6. Indemnity costs were also the subject of comment in Arundle Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) HCA 26, delivered on 16 February 2001, in which Callinan J stated:

   I would not order indemnity costs as the occasion for an order for these should, in my opinion, be exceedingly rare as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers.

7. I do not regard this as a case where costs should be calculated on either a solicitor / client or an indemnity basis.  Costs should be calculated on a party/party basis. 

Costs of and incidental to this application for costs 

1. The husband is also entitled to the costs of making this costs application and

   
   

   I will order that accordingly.  Those costs are not to include preparation of the submissions which were sent under cover of the letter from the husband’s solicitors dated 22 November 2007. 

Assessment of costs rather than fixing costs

1. Regrettably, this is a matter in which the parties will have to have costs assessed rather than me being able to fix costs at a certain amount.  In costs matters I favour finality over precision.  However, in this case I am satisfied that my fixing costs may not do justice between the parties.  More importantly, it would constitute appealable error the rectification of which, if sought, would add yet further to the burden of the husband and the wife.  

2. It is appropriate for the matter to be placed in the costs assessment stream now so I will refer it to a costs settlement conference as provided in Rule 19.28 of the Family Law Rules 2004[6].

   [6] At a settlement conference for an itemised costs account, the Registrar:

   (a)     must;

   (i)give the parties an opportunity to agree about the amount for which a costs assessment order should be made; or

   (ii)identify the issues in dispute; and

   (b)must make procedural orders for the future conduct of the assessment process.

Form of orders sought by the applicant

1. As indicated, on 16 October 2008, I ordered that:-

   That the written submissions of both parties in relation to costs include submissions in relation to the mechanics of how any cost order if made ought be implemented having regard to the mother’s status as an undischarged bankrupt whose principal asset is the balance of an entitlement under the estate of her late father which estate may not yet be finalised

2. The submissions of the husband do not address the issue of the wife’s bankruptcy other than to propose orders which require that directions be given by the wife to her bankruptcy trustee and to the trustee of her father’s estate.  Those proposed orders appear at page 13 of the husband’s costs submissions filed 31 October 2007.  That said, the wife’s submissions do not respond at all to the form of orders proposed by the husband.  I will adopt the construction of the orders proposed by the husband.  I note that none of the proposed orders are directed to third parties.  The husband’s proposals do not go further than to impose obligations and responsibilities on the wife to authorise and direct third persons to act in a certain way.  As I have said, the wife has not objected to the form of the orders.  I will not, however, make the order sought by the husband which would require the wife to provide documents about how she applied some $40,000 referred to in her father’s will.  The wife’s evidence at trial was that her inheritance was reduced in order to repay her brother $40,000 which was paid by him to the wife’s then lawyer for the parenting proceedings in 2004.  I am not satisfied that such an order is properly incidental to my determination of costs. 

Conclusion

1. For the above reasons I make the orders which are set out at the beginning of these reasons. 

I certify that the preceding fifty one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett

Associate: 

Date:  8 February 2008