Clivery and Conway (Security for Costs)

[2007] FamCA 1436

FAMILY COURT OF AUSTRALIA

CLIVERY & CONWAY (SECURITY FOR COSTS) [2007] FamCA 1436

FAMILY LAW - APPEAL – COSTS – Security for costs – arguable case – application dismissed

Family Law Act 1975 (Cth) s 117, s 117AB

Harris and Harris (1991) FLC 92-254
Jones and Jones (2001) FLC 93-080
Luadaka v Luadaka (1998) FLC 92-830

APPLICANT: [Ms Clivery]

RESPONDENT: [Mr Conway]

FILE NUMBER: CAF 551 of 2002

APPEAL NUMBER: EA 61 of 2007

DATE DELIVERED: 11 December 2007

PLACE DELIVERED: Sydney

PLACE HEARD: Brisbane

JUDGMENT OF: May, Thackray and O'Reilly JJ

HEARING DATE: 8 November 2007

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 26 March 2007

LOWER COURT MNC: [2007] FamCA 1306

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Foster

SOLICITOR FOR THE APPLICANT: Anne Marie Proctor & Associates

COUNSEL FOR THE RESPONDENT: Self represented

SOLICITOR FOR THE RESPONDENT: N/A

Orders

1. That the Form 2 Application filed on 5 September 2007 by the applicant, [Ms Clivery], be dismissed.

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: EA 61 of 2007
File Number: CAF 551 of 2002

[Ms Clivery]

Applicant

And

[Mr Conway]

Respondent

REASONS FOR JUDGMENT

1. We have before us the application of [Ms Clivery] (“the mother”) for an order for security for costs in relation to an appeal instituted by [Mr Conway] (“the father”).

2. The mother’s application was filed on 5 September 2007, which was outside the time prescribed by the Rules; however, we granted an extension of time at the commencement of the hearing.   

3. The application seeks an order that the father pay $15,000 by way of security for any costs that the father may be ordered to pay in relation to the appeal.  At the commencement of his submissions, counsel for the mother acknowledged that $15,000 was excessive and suggested $5,000 would be more appropriate. 

4. The father opposes the application for security.

Background

1. The father’s Notice of Appeal, filed in June 2007, relates to an order for costs made by Waddy J on 26 March 2007, following a 10-day trial in 2005.  The trial dealt with matters concerning the welfare of the parties’ daughter, [Alexandra].

2. Waddy J determined that [Alexandra] should move from the mother’s home to live with the father.  It appears the principal reason for so ordering was his Honour’s finding that the mother had physically abused [Alexandra], notwithstanding her strong and repeated denial of ever having done so.

3. The father’s application for costs was heard in Canberra on 26 March 2007, at which time the father was represented by his solicitor and the mother was represented by counsel.  Both parties filed affidavits prior to the hearing, but the father elected not to rely upon his.  The father, who lives in Queensland, did not attend the hearing.  The mother was in attendance and was cross-examined.  Her counsel also tendered (without objection) a variety of documents relevant to the father’s financial position. 

4. In support of his application for costs, the father relied upon the provisions of s 117AB of the Family Law Act 1975 (“the Act”). This section, which was inserted in the legislation after the trial had been completed, provides as follows:

   117ABCosts where false allegation or statement made

   (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.

5. Waddy J delivered ex tempore reasons for judgment. He found that s 117AB applied because of “a persistent course of deceit and false statements by the mother” concerning the physical abuse of [Alexandra]. His Honour went on to discuss the provisions of s 117(2A) of the Act, which the Court must consider when making orders for costs. Having done so, his Honour ordered the mother to make a contribution to the father’s costs, fixed in the amount of $7,500. He then ordered that this amount could be offset against certain sums he was advised were owed by the father to the mother.

6. The father is now self-represented and drafted his own Notice of Appeal.  The lengthy Grounds of Appeal are more in the style of a submission, rather than grounds of appeal.  In his affidavit sworn 26 October 2007, the father noted that a Judge of the Appeal Division had “provided the opportunity for me to file an amended notice of appeal”, but he went on to say that he was “unable to identify how my existing notice of appeal fails to address the relevant issues”.  The father had therefore done nothing to rectify the Notice of Appeal by the time the matter came before us.

Principles governing applications for security for costs

1. The power of the Court to order security for costs is to be found in s 117(2) of the Act, which is in the following terms:

   If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

2. Sections 117(4) and (5) have no relevance here and much of s 117(2A) relates to costs issues arising after proceedings have been concluded. The only parts of s 117(2A) with potential relevance to an application for security are as follows:

   In considering what order (if any) should be made under sub-section (2), the court shall have regard to:

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

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   …

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

3. Rule 19.05(2) of the Family Law Rules 2004 provides that in deciding whether to make an order for security for costs, the court may consider any of the following matters:

   (a)the applicant’s financial means;

   (b)the prospects of success or merits of the application;

   (c)the genuineness of the application;

   (d)whether the applicant’s lack of financial means was caused by the respondent’s conduct;

   (e)whether an order for security for costs would be oppressive or would stifle the case;

   (f)whether the case involves a matter of public importance;

   (g)whether a party has an order, in the same or another case (including a case in another court), against the other party for costs that remains unpaid;

   (h)whether the applicant ordinarily resides outside Australia;

   (i)the likely costs of the case;

   (j)whether the applicant is a corporation;

   (k)whether a party is receiving legal aid.

4. Rule 22.49 provides that Part 19.2 of the Rules applies to an application for security for costs in an appeal. Therefore, a court hearing an application for security for costs of an appeal may take into account the list of factors set out in Rule 19.05(2). The list is neither prescriptive nor exhaustive. We will discuss later one matter not mentioned at all in Rule 19.05(2) that is of particular importance when considering an application for security for costs of an appeal; and also the matter of the impact of delay, the mother’s application for security having been made outside the time prescribed by the Rules and an extension of time granted.

5. The Full Court in Luadaka v Luadaka (1998) FLC 92-830 considered the general principles applicable to claims for security for costs. Although the judgment was delivered prior to the introduction of Rule 19.05(2), we nevertheless consider the following passages worth repeating:

   39.An order that an applicant provide security for costs may be made in appropriate circumstances. However, it must be established that there are circumstances justifying the making of such an order. In considering whether to make such an order regard must be had to the provisions of s 117(2A). The Family Law Act does not separately list factors which should be taken into account when dealing with an application for security for costs of a pending application for relief pursuant to provisions of the Act.

   ...

   61.In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs. However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.

   62.The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other.

The financial means of the parties

1. The mother’s application for security is based primarily on the parties’ financial circumstances and the difficulty she would experience in enforcing any order for costs that might be made against the father.

2. In her affidavit in support of her application, the mother said her circumstances were unchanged from those set out in her financial statement filed in the proceedings before Waddy J in March 2007.  That statement was not provided to us; however, his Honour made the following findings:

   30.The mother's circumstances are as disclosed in her financial statement.  In her most recent financial statement she discloses that she has the total of assets of $9360.  She has superannuation, which, of course, she cannot access, of over $100,000.  She owes $116,820, mainly by way of loan from her parents, and her mother, who has placed, I am informed, a mortgage over her house.  And the mother is seeking to repay that debt from her total average weekly income, which was disclosed to be $1,872 per week.

   31.The mother’s household expenditure of $1,280 is met in great part by her partner to the extent of $987 per week. 

   32.It is clear that while these parties may have had assets (mainly of the former matrimonial home, which itself was mortgaged), when they commenced their litigation, they have very little left.  And that of itself is a tragedy.

   33.The mother pays tax of nearly $600 a week; rent and mortgage of $235; some small expenses for a motor vehicle; repayments of loans over $400 a week; and maintenance for the daughter.  She said she is paying $279 per week, but there is an assessment of $222.  So all in all, the mother is spending more than she is receiving.  And I am convinced, she having been cross-examined on her evidence, that it is safe to find that those are the financial circumstances in which she finds herself.

3. The most recent information available to us concerning the financial circumstances of the father is that contained in his application for waiver of the filing fee on his appeal.  That application was sworn in April 2007.  The document discloses that the father had income of only $420 a fortnight, notwithstanding day-to-day living expenses of $1,480 a fortnight.  He claimed to have assets of only $450 and liabilities of more than $418,000.

4. There is controversy as to whether or not the father’s financial circumstances are accurately represented in the fee waiver application.  This relates to his entitlement to funds from the estates of his parents, which have been the source of his significant borrowings.  Nevertheless, for present purposes, we consider the information provided by the father in his fee waiver application should be taken at its face value.  Hence, we proceed on the basis that the father is impecunious and that the mother may well have difficulty in enforcing any order for costs she might obtain in the event the appeal is dismissed.

5. In Jones and Jones (2001) FLC 93-080, the Full Court considered the significance of the fact that an appellant is impecunious in the context of an application for security for costs in relation to the appeal. The Court said [our emphasis added]:

   21.It has long been recognised that, as a general rule and in the exercise of an unfettered discretion, mere impecuniosity of a litigant who is a natural person, will not of itself be a basis for ordering that person to provide security.  There is, however, an exception to that general rule, namely in the case of appeals.  See Cowell v Taylor (1885) 31 Ch D 34 at 38, J & M O’Brien Enterprises Pty Ltd v Shell Co of Australia Ltd (No 2) (1983) 70 FLR 261 at 264, Ciappina v Ciappina (1983) 70 FLR 287 at 290 and Paton v Campbell Capital Ltd (unreported, Federal Court of Australia, 1 July 1993).

   22.The fact that the wife would be unable to pay the costs awarded against her, if her appeal was dismissed, is, in our view, a significant factor to take into account in considering whether to exercise the discretion to order security in favour of the husband, but it is not the only or deciding factor.

   23.If an appeal appears to have little merit, a court may be more disposed to make an order for security for costs.

6. Although not mentioned in Rule 19.05(2), the fact that a respondent is impecunious can clearly be a matter of considerable significance in determining an application for security for costs of an appeal. Nevertheless, we accept the father’s impecuniosity is only one of the factors to be taken into account and must be balanced against others, especially the prospects of success of the appeal. We also note that, arguably, the father’s potential inability to meet a costs order arises, at least in part, from the expense he incurred in exposing the mother’s blatant deception of the Court.

The prospects of success of the appeal

1. Were we to embark on a careful analysis of the father’s Grounds of Appeal in order to gauge their likely ultimate fate, we would first have to attempt to distil his complaints and ascertain on what basis it is suggested his Honour erred in the exercise of his wide discretion.  We do not consider the limited resources of the Appeal Division should be diverted by providing a detailed analysis of the likely success of the pending appeal in every security for costs application.  This is especially so in the case of a litigant who has been warned that his Notice of Appeal is deficient and chooses to do nothing to rectify it.  We will nevertheless make a few general remarks. 

2. Our overall impression of the father’s Grounds of Appeal is that he is aggrieved that he recovered such a tiny proportion of his legal costs in circumstances where his costs have been greatly increased by what his Honour found to be the mother’s blatant deceit.  His Honour gave careful consideration to this issue and, for reasons he clearly explained, determined that the mother should pay only a very modest proportion of the costs. 

3. We also have the impression that the father sees the appeal as a vehicle to draw attention to what he considers to be the failings not only of the mother’s legal representatives but also his own legal representatives, whereas the appellate process is primarily directed to consideration of error on the part of the trial judge.  In this regard, we note that the father now hopes to promote the chances of success of his appeal by providing evidence to the Full Court, when he elected to provide no evidence to the trial Judge concerning the costs issue.

4. One specific matter about which the father complains is the way in which Waddy J took into account the report of a [doctor].  The Notice of Appeal asserts that the report did not meet the “evidenciary ^[sic] requirements of the Family Court”. We note that no objection was taken to the admissibility of [the doctor’s] report at the hearing before Waddy J. More importantly, we are not persuaded that his Honour took [the doctor’s] report into account for any purpose other than considering whether the s 117AB threshold had been crossed. On that issue, he found in favour of the father.

5. Another specific matter about which the father complains is his Honour’s finding that there were no offers of settlement to be taken into account pursuant to s 117(2A)(f). The obvious difficulty with that proposition is that the father provided no evidence of such offers and now complains because he says the mother gave false testimony concerning offers allegedly made. This grievance is similar to the father’s complaint that his Honour was misled by the mother concerning his financial position, in circumstances where he chose to provide no evidence of his own financial position.

6. The matters discussed thus far are not such as would lead us to conclude that this is likely to be one of those “rarest of cases” in which the Full Court will interfere with an order for costs made by a trial judge:  Harris and Harris (1991) FLC 92-254 at 78,711. There is, however, an issue raised by the father in his Notice of Appeal (albeit obliquely) which we consider at least arguable.

7. This relates to the conclusion his Honour reached after having found that the mother had total assets of only about $9,000 and owed her parents more than $116,000.  Whilst his Honour made clear that he would have been inclined to order the mother to pay more of the costs if she had more capital, he concluded that he should not order her to pay an amount that would give her “every inducement to proceed to bankruptcy”.  Instead, he considered he should make an order for a sum “that the mother will notice, but not be crippled by”.  He therefore determined that the order for costs should be “in relation to the capital held by the mother”.  Having made clear he was concentrating on the mother’s capital, his Honour said simply, “[t]he figure disclosed was some $9000-odd.  Of that the mother is to pay the father’s costs assessed at $7,500”. 

8. His Honour then went on to say that the mother would be at liberty to set off against the $7,500 certain sums already owing to her by the father, including amounts outstanding under previous costs orders.  After hearing submissions in relation to the extent of the father’s existing liability, his Honour determined that the net amount to be paid by the mother would be only $1,900. 

9. It is now common ground that his Honour was misled in relation to the extent of the set off.  This is because one costs order of $3,000 previously made against the father had, in fact, been satisfied in full.  This was ascertained only during the course of the appeal process, whereupon the mother voluntarily repaid the sum of $3,000 to the father.

10. In our view, the father might have two reasonable grounds for complaint in relation to the approach adopted by Waddy J.  The first is that his Honour did not give express consideration to the possibility of making an order for costs in an amount somewhat in excess of the capital available to the mother in the knowledge that after the set off was applied, she would still have sufficient capital to meet the payment.  The second is that his Honour did not give express consideration to the possibility of ordering the mother to make a greater payment, but allowing her an extended period in which to pay.  That is to say, his Honour arguably took into account only the mother’s meagre capital resources and not her substantial income in coming to his decision.  It is true that his Honour found that the mother’s expenses exceeded her income, but included in the mother’s expenses were loan repayments of $400 per week, which presumably were in discharge of the liability to her parents who had assisted her to fund the litigation.  A question arises as to whether that payment ought to be perceived as having priority over the father’s claim for the costs which he incurred in successfully pursuing the same litigation. 

1. Having acknowledged that there may possibly be merit in the propositions advanced by the father, we recognise immediately that these are likely to be met by submissions from the mother that may have at least equal merit.  She will presumably, for example, say that the first of the two propositions in the preceding paragraph is de minimis.  There is also an issue as to whether his Honour was ever invited by the father to consider ordering costs on terms over an extended period. 

2. The merits of these competing arguments are not for us to determine.  That will be the task of the Full Court that hears the substantive appeal.  We therefore conclude that whilst a great deal of what the father raises in his Notice of Appeal lacks any apparent merit, there are at least one or two propositions he wishes to advance which have at least some prospects of success. 

The genuineness of the application for security

1. There is no suggestion that the mother’s application lacks bona fides.   

Whether an order for security would be oppressive or stifle the litigation

1. We are not convinced that an order for security for costs would be oppressive or stifle the litigation.  Although the father claims to have no assets of significance and little income, he referred in his submissions to his intention to obtain further legal advice in relation to his affairs.  We infer he considers he has the capacity to fund such advice.  It is also a matter of record that the father has shown a capacity to secure significant loans from the estates to which we have referred above.  We are not persuaded that the father would be unable to borrow the comparatively modest amount now sought by way of security.

Whether the appeal involves a matter of public importance

1. To the best of our knowledge, the Full Court has not yet had occasion to consider an appeal involving the application of s 117AB. Nevertheless, we do not perceive the father’s appeal as raising any matter of general public interest or importance, since nothing he has raised demonstrates any error of principle in the way in which Waddy J approached the application of s 117AB.

2. Section 117AB erects a hurdle, which once successfully overcome requires the Court to make an order for costs, but does not seek to limit the Court’s wide discretion to fix the quantum. His Honour found the threshold test had been satisfied and this appeal therefore relates only to the issue of quantum.

Whether there are any orders for costs that remain unpaid; the likely costs of the case and legal aid

1. As a consequence of the set off applied by Waddy J, there are now no unpaid orders for costs. 

2. As previously noted, the wife seeks security in the sum of $5,000, which is a reasonable estimate given the nature of the appeal.  Whilst it is a small sum by comparison with what she has already paid during the proceedings, it is nevertheless an amount she can ill afford to pay.

3. Neither party is in receipt of legal aid. 

Whether there has been delay in making the application

1. Although delay in making the application is not a factor mentioned in Rule 19.05(2), the Full Court in Luadaka (supra) considered that it may be relevant.

2. There was delay in making the application; however, the father was on notice from shortly after the Notice of Appeal was filed that an application for security would be made.  We extended the time for filing of the application and we do not consider the delay in making the application to be of significance.  

Likelihood of costs being ordered on the appeal

1. The issue of payment of costs by the father will, of course, only arise if his appeal fails and an order for costs is made against him.  We are by no means satisfied, even if the appeal fails, that the mother will necessarily be successful in obtaining an order for costs. 

2. In determining whether to exercise its wide discretion in relation to ordering costs, the Full Court would be entitled to take into account at least some matters that may not assist the mother’s case.  Chief among these is the fact that at the time the father instituted the appeal, he had a legitimate grievance that the payment of the $3,000 costs order had not been taken into account in the calculation of the set off.  This issue has since been resolved by the repayment of the $3,000 but we note there still appears to be the issue of the interest on that amount that was taken into account in calculating the set off. 

3. It is also possible, in determining whether or not to order the father to pay the mother’s costs, that the Full Court will take into account the fact that Waddy J would undoubtedly have ordered the mother to pay a substantially greater sum than was ordered were it not for the mother’s difficult financial position.  In such circumstances, the Full Court may not be favourably disposed to requiring the father to bear the costs the mother has elected to incur in obtaining legal representation to oppose the father’s appeal.  

Conclusion

1. We do not consider this is an appropriate case for security for costs.  The father’s appeal is not entirely devoid of merit.  Even if his appeal is dismissed, the Full Court may refuse an application by the mother for costs.  Finally, the father’s current difficult financial circumstances are arguably, in part, due to the increased legal costs he incurred as a result of the mother having sought to deceive the Court.

2. We therefore propose to dismiss the mother’s application for security for costs.  We have previously made an order reserving the costs of the application as costs in the appeal.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date:  11 December 2007