CLEAVE & CLEAVE
[2020] FamCA 314
•1 May 2020
FAMILY COURT OF AUSTRALIA
| CLEAVE & CLEAVE | [2020] FamCA 314 |
| FAMILY LAW – INTERVENTION – Third party – Where there is an application for leave to intervene in the proceedings – Where the application is opposed – Where the intervener contends he has an equitable interest in a trust which the parties have an interest in – Where the intervener is the son of the parties – Where the intervener has standing – Orders FAMILY LAW – COSTS – Circumstances justifying an order – Conduct of the parties to the proceedings – Where the applicant seeks costs on an indemnity basis – Where there is an application for intervention – Where the intervener had notice of the parties’ claims and of the interim hearing – Where the intervener failed to make the application for intervention until the day of the interim hearing – Orders |
| Family Law Act 1975 (Cth) ss 78, 79, 106B, 114, 117(2A) Family Law Rules 2004 (Cth) rr 6.02, 10.12, 19.08, 19.18 Law and Justice Legislation Amendment Act 1988 (Cth) s 39 |
| Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 Donis & Ors v Donis [2007] VSCA 89 Giumelli v Giumelli (1999) 196 CLR 101 Kennon v Spry (2008) 238 CLR 366 Kohan & Kohan (1993) FLC 92-340 Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 Prantage & Prantage (2013) FLC 93-544 Re Wakim; Ex parte McNally (1999) 198 CLR 511 Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151 Smith v Smith (1986) 161 CLR 217 |
| APPLICANT: | Mr Cleave |
| RESPONDENT: | Ms Cleave |
| INTERVENER: | Mr B Cleave |
| FILE NUMBER: | ADC | 1857 | of | 2019 |
| DATE DELIVERED: | 1 May 2020 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 22 April 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Wells QC with Mr McGinn |
| SOLICITOR FOR THE APPLICANT: | Barnes Brinsley Shaw Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Pyke QC |
| SOLICITOR FOR THE RESPONDENT: | Rosey Batt & Associates |
| COUNSEL FOR THE INTERVENER: | Mr Whitington QC |
| SOLICITOR FOR THE INTERVENER: | Jordan & Fowler Family Lawyers |
Orders
That leave is given for Mr B Cleave to be joined as the second respondent to the proceedings.
That the second respondent pay the costs of the husband thrown away in respect of the hearing on 22 April 2020 to be determined on a party/party basis as may be agreed or in default of agreement as determined by the Court.
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 Cleave & Cleave 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 ADELAIDE |
FILE NUMBER: ADC 1857 of 2019
| Mr Cleave |
Applicant
And
| Ms Cleave |
Respondent
And
Mr B Cleave
Intervener
REASONS FOR JUDGMENT
INTRODUCTION
By Initiating Application filed 13 May 2019, Mr Cleave (“the husband”) commenced proceedings for property settlement. On 7 February 2020 he filed an Amended Initiating Application seeking the following final orders:-
1.1That the wife do exercise her power of appointment of the C Trust to appoint the husband as joint appointor of the said Trust;
1.2That upon compliance with order 1 above, the wife do all things necessary to appoint herself and the husband as Trustees of the C Trust;
1.3That upon compliance with orders 1 and 2 hereof, the wife do join with the husband and exercise her powers as Trustee of the C Trust to distribute the assets of the said Trust in the following manner, namely as to one-half thereof to the husband or his nominee and as to the remaining half thereof, to herself or her nominee;
1.4That the wife do pay to the husband an amount equal to one-half of the nett value of the property at D Street, Adelaide registered in her name;
1.5That the husband do pay to the wife a sum equal to one-half the value of the water licence held by the husband; and
1.6That there be a superannuation splitting order as between the husband and wife pursuant to which their respective superannuation entitlements are split equally between them.
By her Amended Response to Initiating Application filed 4 March 2020, Ms Cleave (“the wife”) seeks that the property of the parties be divided equally between them.
The parties are agreed as to the adjustment of property but have not agreed the manner in which that is to occur.
Both parties are over the age of 70 years. They were married in 1968, separated on 16 January 2014 and an order was made dissolving their marriage in 2019.
Both parties agree that the value of the assets including their separate superannuation entitlements exceeds $20 million. There remains disagreement as to the totality of the asset pool and the value to be attributed to individual assets, in particular the value of the parties’ interest in E Pty Ltd as Trustee for the C Trust.
Following separation in 2014, in addition to other income and financial resources available to the husband, he received $10,000 per month from C Trust. It is not yet clear as to the status of the payments received by the husband, but it is likely that they were not by way of trust distribution but recorded in the financial statements of C Trust by a reduction of the husband’s credit loan account.
The payments to the husband ceased in about March 2019. They have not resumed.
By Application in a Case filed 4 March 2020, the husband seeks that the wife pay or cause to be paid to him the sum of $10,000 by way of urgent spousal maintenance, or in the alternative, that the wife cause C Trust to pay the monthly sum to the husband.
In addition, the husband seeks by way of partial settlement of property the sum of $1 million and litigation funding pursuant to s 117 of the Family Law Act 1975 (Cth) (“the Act”), s 79, s 72 or s 114 of the Act in the sum of $120,000.
The husband also seeks by way of a list of documents that the wife make extensive disclosure in respect of the various entities in which the parties have valuable interest.
By her Response to an Application in a Case filed 17 April 2020, the wife seeks orders that each of the parties make disclosure of relevant documents and whilst the response document does not engage with the orders sought by the husband as to spousal maintenance, partial settlement of property or litigation funding, it is apparent from the wife’s affidavit that she opposes those orders.
The interim proceedings were listed for hearing on 22 April 2020.
Apparently, without warning to either of the parties, their son Mr B Cleave (“the intervener”) filed a Response to an Application in a Case on 22 April 2020 opposing or at the least not agreeing with the orders sought by each of the husband and the wife and seeks the following orders:-
1.That I have leave to intervene in the event of any opposition to my Notice of Intervention filed herewith.
2.That I have leave to file a Response to Initiating Application, Statement of Claim, and one further affidavit within 42 days.
3.That paragraphs 1.2 and 2 of the husband’s Application in a Case (insofar as it seeks a payment from C Trust) be dismissed.
4.Costs.
The response was supported by an affidavit of the intervener and a Notice of Intervention. The application for intervention was opposed by the husband and supported by the wife.
The gravamen of the intervener’s contention is that the wife is the first appointor and he is the second appointor of C Trust pursuant to amendments made to the Trust Deed in 2014. The wife and the intervener are the two directors of E Pty Ltd. The intervener holds 25 percent of the shares, with the husband, the wife and the intervener’s sister holding the balance of the shares.
The intervener contends that he is a beneficiary of C Trust and has a substantial loan account of approximately $900,000.
He asserts that he has had a history of employment with C Trust pursuant to a contract which expired in 2007. Thereafter, the intervener continued to remain employed until 2014 when his involvement with C Trust was as a consultant.
The intervener considers that he has an equitable interest in C Trust which is likely to be affected by the orders sought by the husband and possibly by the wife. The implication is that the assessment by each of the parties as to the likely value of C Trust does not bring to account the potential value of his interest in C Trust.
Whilst noting the husband’s objection, I determined that I should hear the application for intervention before determining the outstanding interim proceedings which have now been listed for hearing on 6 May 2020.
BACKGROUND
The husband is a scientist and was involved in various projects involving resource discovery.
The wife is a business owner involved in the ongoing operation of a crop and processing operation.
In 1982 the precursor to C Trust was established with the husband as the sole appointor and the parties as the directors of the Trustee Company.
In 1985 the parties acquired vineyards in the F Region.
The vineyard interests of the parties increased and ultimately were transferred to C Trust. In 1997 the vineyard business diversified and C Trust commenced the production of a product.
In 2006 the husband was diagnosed with cancer. He underwent ongoing treatment, however by 2014 it appeared that the disease had spread to the husband’s lungs, liver, thoracic cavity and thyroid.
The husband contends that in 2014 he was advised that he had only a short time to live. In March 2014 he resigned as the appointor of C Trust and from his directorship of the trustee company.
The wife became the first appointor and following an amendment to the Trust Deed for C Trust the intervener became a second appointor.
In March 2015, the husband underwent a trial for the treatment of cancer which was ultimately successful in the husband now being in complete remission.
The parties and the intervener are not in agreement as to any understanding of the ongoing role of the husband and the status of C Trust as property of the parties. It seems that the wife resists any involvement by the husband.
The complexity of the financial arrangements between the parties is heightened by a consideration of the credit loan accounts of the parties and the intervener in C Trust. By consent, the Court has received the financial statement and report for C Trust for the year ended 30 June 2018. By reference to the balance sheet forming part of the financial report, the non-current loans to associated entities record that the husband has a credit loan account of $14,152,599.07. The wife has a credit loan account of $2,859,563.89 and the intervener had a loan account of $1,068,360.26.
At present it is not suggested that the parties or the intervener are not entitled to their loan account balance at least as at 30 June 2018.
Whilst not a matter that is a relevant consideration in order to determine the interim proceedings, a valuation of C Trust would likely reveal its net value over and above the extensive liabilities to the parties, the intervener, non-current bank liabilities and outstanding employee benefits. This may narrow the compass of the dispute.
RELEVANT PROCEDURAL HISTORY
On 28 November 2019, orders were made that required the husband to file and serve an Amended Initiating Application better particularising the final orders sought and that the wife file an Amended Response to Initiating Application in similar terms. It was the Court’s intention to assist the parties in the resolution of the proceedings given that at that stage there was broad agreement that the property of the parties should be divided equally between them.
The potential for the involvement of the intervener had been raised in various affidavits and accordingly a further order was made that required the parties to file and serve their applications for final orders upon any interested third party.
On 28 November 2019, the parties further agreed that subject to the husband being able to secure his plant and equipment and other personal belongings, his ability to enter upon the properties held by C Trust and the G Trust was subject to the wife’s consent.
On 5 March 2020, the Court considered the Application in a Case filed 4 March 2020 and ordered that it be listed for hearing on 22 April 2020. The husband and wife were represented as was the intervener who was noted to be a subpoenaed party.
Orders were made that required the wife and any third parties, but in particular the intervener, to file and serve any response and affidavits in support by 4.00 pm on 3 April 2020. It is not controversial that the intervener caused documents to be filed on the morning of 22 April 2020.
The intervener’s affidavit concedes that the documents sought to be relied upon were filed late and provides no explanation for the lack of compliance with the 5 March 2020 order.
RELEVANT LEGAL PRINCIPLES
The Court has jurisdiction to make orders that affect the interests of third parties pursuant to ss 78, 106B and s 114 of the Act.
There are limitations to the exercise of available power in respect of third parties. In Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337, the High Court considered that an order may be made directing a party to a marriage to do what is required to comply with an order even if it impacts upon a third party, but a Court cannot order a third party to do that which they are not required by law to do. The position is summarised in the following statement:-
Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.[1]
[1]Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 355.
In Smith v Smith (1986) 161 CLR 217 the High Court said at 237:-
Quite clearly, under the Constitution, the jurisdiction conferred on a federal court cannot be wider than the matters mentioned in s. 75 and s. 76. However, the view that has been accepted by the majority of the court in a line of cases commencing with Philip Morris Inc. v Adam P. Brown Male Fashions Pty. Ltd. is that the grant of jurisdiction to determine a matter carries with it jurisdiction to determine the whole matter, and that “a ‘matter’ is a justiciable controversy which must either be constituted by or must include a claim arising under a federal law but which may also include another cause of action arising under another law, provided it is attached to and is not severable from the former claim”: Fencott v Muller.
(Footnotes omitted)
In Re Wakim; Ex parte McNally (1999) 198 CLR 511, Gummow and Hayne JJ said:-
[139]The central task is to identify the justiciable controversy. In civil proceedings that will ordinarily require close attention to the pleadings (if any) and to the factual basis of each claim.
[140]… What is a single controversy “depends upon what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationship”. There is but a single matter if different claims arise out of “common transactions and facts” or a “common sub-stratum of facts”, notwithstanding that the facts upon which the claims depend “do not wholly coincide”. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination.
(Footnotes omitted)
If a court has jurisdiction in respect of a matter then it must determine the entirety of the matter and is not able to exercise a discretion to decline jurisdiction.
Section 78 of the Act provides:-
(1)In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.
(2)Where a court makes a declaration under subsection (1) it may make consequential orders to give effect to the declaration, including orders as to the sale or partition and interim or permanent orders as to possession.
It is noted that s 78(3) of the Act which restricted the application of s 78 of the Act to a declaration between the parties was omitted by amending legislation.[2] The consequence is that the section extends to the interests of third parties.
[2] Law and Justice Legislation Amendment Act 1988 (Cth) s 39.
In Kennon v Spry (2008) 238 CLR 366 French CJ considered whether the interests of a spouse in a trust may be considered as property pursuant to s 79 of the Act. His Honour stated that:-
64.The word “property” in s 79 is to be read as part of the collocation “property of the parties to the marriage”. It is to be read widely and conformably with the purposes of the Family Law Act. In the case of a non-exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a wide range of purposes. In the present case, prior to the 1998 Instrument those purposes could have included the maintenance or enrichment of Mrs Spry.
65.Where property is held under such a trust to a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as “property of the parties to the marriage” because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.
…
77.The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust.
78.Gummow and Hayne JJ, in their joint reasons, characterise Mrs Spry’s right with respect to the due administration of the Trust as part of her property for the purposes of the Family Law Act. I respectfully agree with their Honours that prior to the 1998 Instrument the equitable right to due administration of the Trust fund could be taken into account as part of the property of Mrs Spry as a party to the marriage. So too could her equitable entitlement to due consideration in relation to the application of the income and capital.
Subrule 6.02(1) of the Family Law Rules 2004 (Cth) (“the Rules”) provides that:-
A person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in the case, must be included as a party to the case.
Finally, it is a relevant consideration that s 79(1) of the Act provides:-
In property settlement proceedings, the court may make such order as it considers appropriate:
(a)…
(b)…
including:-
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i)either or both of the parties to the marriage; or
(ii)the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
THE CLAIM OF THE INTERVENER
As discussed, the intervener seeks leave to file a response setting out the orders sought. The intervener asserts that he is a beneficiary of C Trust being a person within the class of beneficiaries of the Trust. He has a credit loan account in C Trust and the summary of his purported interest is set out in his affidavit filed 22 April 2020 as follows:-
21.By his Amended Initiating Application my father seeks to become a joint Appointor with my mother of C Trust and to distribute the assets of the trust equally between them. If Orders were made to give effect to my father’s application then my interest in C Trust will be affected. By her Amended Response filed on 4/3/20 she seeks a final order “That in full and final settlement of property, the matrimonial asset pool be divided between them”. I am uncertain what my mother considers to be “the matrimonial asset pool”.
22.I am seeking an opportunity to particularise my claim and my interest in C Trust and H Town.
The intervener also considers “that the viability of the operation of C Trust and [his] interest therein will be affected. It is my view that C Trust is unable to afford the monthly payment sought by my father especially in the current economic environment and has no funds in reserve to fund a lump sum payment”.[3]
[3] Affidavit of Mr B Cleave filed 22 April 2020 at [23].
In his Response to an Application in a Case, the intervener refers to order 1.2 of the husband’s application which seeks that the wife cause C Trust to pay the husband the sum of $10,000 per month and order 2 that by way of partial settlement of property the wife pay to the husband the sum of $1 million. The intervener seeks that these orders sought be dismissed.
The intervention is opposed. The basis of opposition is that in the absence of a formal response and/or a notice of contention as to fact and law that particularises the intervener’s claim, his affidavit does no more than make a bold assertion of an undefined equitable interest.
In submissions, the intervener’s Queen’s Counsel ably enunciated a range of potential equitable remedies that may ultimately be relied upon by the intervener. It appears that if given an opportunity, the intervener will assert that there were certain representations made to him in relation to the business operation of C Trust, upon which he relied and that it would now be to his detriment if orders were made as sought by the husband and possibly the wife.
The decision of Giumelli v Giumelli (1999) 196 CLR 101 is authority for the proposition that consideration should always be given to whether the circumstances of a case might permit of equity offering an alternative remedy than that of a constructive trust.
In Donis & Ors v Donis [2007] VSCA 89 the following discussion of the principles of equitable estoppel and the concept of “the minimum equity” is of assistance:-
18.Each of the appellants’ argument is to some extent premised on the idea that equitable estoppel “permits a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more”. That idea finds support in some of the judgments in Walton Stores (Interstate) Ltd v Maher and Verwayen v The Commonwealth and in particular in the observations of Mason CJ in Verwayen that:-
“…equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more.”
(Footnotes omitted)
The husband seeks the dismissal of the application of the intervener.
Rule 10.12 of the Rules provides:-
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
I consider that the test of “no reasonable likelihood of success” is not the same as a contention that the claim is “doomed to fail”.
It is a conceptually different test and should be considered as “a more liberal test than the ‘hopeless’ or ‘bound to fail’ test.[4]
[4]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 at [35(c)].
The Court must always be cautious when exercising the power to make an order summarily dismissing proceedings. It should only be exercised if the Court is satisfied that there is no real question to be tried.
In the present proceedings, I am not satisfied that the purported claim of the intervener, whilst at this stage is faintly pressed, could not be said to have no reasonable likelihood of success.
In any event, it would be difficult to exclude the intervener given that he is a child (albeit an adult) of the parties and has standing pursuant to s 79(1)(d)(ii) of the Act.
COSTS
The husband seeks an order for his costs of the hearing on 22 April 2020 thrown away and that they be assessed on an indemnity basis.
Subrule 19.08(3) provides:-
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.
The method of calculation of costs is referred to in sub-r 19.18(1) of the Rules which provides:-
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.
Subrule 19.18(3) of the Rules provides that 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.
In considering what orders should be made, if any, in respect of the respondent’s costs s 117(2A) of the Act requires the Court to have regard to the following:-
(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.
Accordingly, I consider that I have a wide discretion in respect of matters relating to a potential costs order.
I am satisfied that the financial circumstances of each of the parties is such that if an order for costs in favour of the husband is made the intervener has the resources to pay such an order. It is noted that whilst at this stage little is known of the intervener’s financial resources, it is conceded that he has a substantial credit loan account with C Trust.
Neither the husband nor the intervener are in receipt of legal aid.
I consider that the basis of the husband’s claim for costs thrown away occasioned by the conduct of the intervener has its foundation in ss 117(2A) (c) and (g) of the Act.
Whilst the husband’s application seeking the dismissal of the intervener’s intervention was unsuccessful, to a significant degree the costs application was not unreasonable in circumstances where the intervener had notice of the claim of the husband and the wife, does not complain of having received inadequate notice either of the hearing on 22 April 2020, the previous order setting out a time for a response and affidavit to be filed, nor indeed, the general nature of the proceedings and the orders that each of the parties were seeking.
The intervener had an opportunity to explain the basis upon which his response and affidavit in support could not be filed either in compliance with the orders made or in any event, in a timely fashion. He did not do so.
I consider that the conduct of the intervener in seeking to intervene in the proceedings on the morning of the hearing had the consequence of diverting the Court’s attention from a resolution of the interim proceedings to a consideration of the intervention application generally and whether he should be heard, in particular, on the husband’s interim application.
The husband’s Queen’s Counsel was not able to provide an indication of the quantum of costs that was sought. That is not intended to be a criticism of the husband but simply a reflection that the husband and his counsel were given little or no notice of the intervener’s application.
INDEMNITY COSTS
The explanatory guide to the Rules has been accepted by the Court as an accurate definition of “indemnity basis”; namely:-
An entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.
The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 is of assistance in determining whether and in what circumstances an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said in Kohan at 79,605:-
it is fundamental to the exercise of the 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 s 117(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.
In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said at 156:-
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of the courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
In Prantage (supra) the Full Court said at 87,209:-
97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded that this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
Notwithstanding the strong submission by the husband’s Queen’s Counsel, I do not consider that special circumstances exist. As determined, the application of the intervener was not futile or without utility.
Whilst I am alive to the contention in Prantage (supra) highlighting the disparity between scale costs and those charged on a solicitor/client basis, I consider that to order indemnity costs would constitute “a very great departure from the normal standard.”[5]
[5][5] Kohan & Kohan (1993) FLC 92-340 at 79,605.
CONCLUSION
The litigation between the parties now involving the intervener is likely to be complex. I propose to order that the intervener be joined to the proceedings.
I also order that the proceedings should be categorised as fit for senior and junior counsel and on that basis the husband’s costs thrown away in respect of the hearing on 22 April 2020 be paid on a party/party basis as may be agreed, or in default of agreement as further determined by me.
I make orders as appear at the commencement of these reasons.
I certify that the preceding eighty four (84) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 1 May 2020
Associate:
Date: 1 May 2020
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