D and A
[2007] FCWA 3
•17 JANUARY 2007
JURISDICTION:
FAMILY COURT OF WESTERN AUSTRALIA
| ACT: | FAMILY LAW ACT 1975 |
| LOCATION: | PERTH |
| CITATION: | D and A [2007] FCWA 3 |
| CORAM: | THACKRAY J |
| HEARD: | WRITTEN SUBMISSIONS |
| DELIVERED: | 17 JANUARY 2007 |
| FILE NO/S: | PT 3121 of 1997 |
| BETWEEN: | D |
Applicant/Wife
AND
A
Respondent/Husband
(Page 2)
Catchwords:
Costs - indemnity costs awarded - unnecessary to show "wilful disregard" of established law in pursuing a hopeless case before awarding indemnity costs Legislation:
Family Law Act 1975, s 117(1), s 117(2), s 117(2A)
Category: Not Reportable
Representation:
Counsel:
| Applicant: | Ms S Vincent |
| Respondent: | Mr D Williams QC |
Solicitors:
| Applicant: | Hudson Henning & Goodman |
| Respondent: | Butlers |
Case(s) referred to in judgment(s):
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Collins & Collins (1985) FLC 91-603
Council of the Municipality of Botany v Secretary Department of the Arts
[etc] (1992) 34 FCR 412
Fitzgerald v Fish (2005) 33 Fam LR 123
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants
Pty Ltd (1988) 81 ALR 397
I and I (No 2) (1995) FLC 92-625
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers
(No 2) (1993) 46 IR 301
(Page 3)
Kohan and Kohan (1993) FLC 92-340
Munday v Bowman (1997) FLC 92-784
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Fed C of A, 3 May
1991, unreported)
(Page 4)
1 I am required to determine the wife’s application for the husband to pay her costs, which she proposes should be calculated on an indemnity basis.
Background
2 The wife has applied to the Court for spousal maintenance. The husband applied for the summary dismissal of her application. In November 2006, I delivered reasons for judgment in which I found there was no basis for the wife’s application to be dismissed summarily. I therefore dismissed the husband’s application. Further background may be found by reference to my substantive reasons for decision.
The law
3 Subsection 117(1) of the Family Law Act 1975 provides that, subject to subsection 117(2), each party to proceedings shall bear his or her own costs. Subsection 117(2) provides that if the Court is of the opinion there are circumstances that justify doing so, the Court may, subject to subsection 117(2A), make such orders as to costs as it considers just.
| 4 | Subsection 117(2A) provides as follows: “In considering what order (if any) should be made under subsection (2), the court shall have regard to – | |||||||
|
(Page 5)
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings; (f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and (g) such other matters as the court considers relevant.”
5 The Full Court of the Family Court of Australia in Collins & Collins (1985) FLC 91-603 described the discretion conferred by s 117 as being a “broad” one, and noted that the s 117(2A) factors are not to be read in a restrictive way. The Full Court in Fitzgerald v Fish (2005) 33 Fam LR 123 also made clear that any one of the factors referred to in s 117(2A) may be the sole foundation for an order for costs. Nevertheless, as an earlier Full Court said in I and I (No 2) (1995) FLC 92-625 at 82,277, the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”.
6 The settled practice of the Court is that orders for payment of costs are usually made on what is known as a “party and party” basis, with the costs being calculated in accordance with the scale of costs contained in the Family Law Rules 2004. Although it is now commonplace for legal practitioners to enter into an agreement with their clients to charge at rates in excess of those prescribed by the Rules, the Court will not depart lightly from the settled practice unless there are circumstances of an “exceptional kind”. Kohan and Kohan (1993) FLC 92-340 at 79,614.
7 There are a number of reported judgments providing guidance as to the sort of circumstances which may be considered to be sufficiently exceptional to warrant departure from the standard rule of awarding costs on a “party and party” basis. Although each case turns on its own facts, four of the categories of cases mentioned by Holden CJ in Munday v Bowman (1997) FLC 92-784 at 84,660 (paraphrasing from a list of relevant factors distilled from the comprehensive review of earlier authorities by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225) are the type of circumstances which would ordinarily lead me to give careful consideration to ordering costs to be paid on an indemnity basis. These may be further paraphrased as follows:
| (Page 6) | ||||||
| • | commencing or continuing proceedings in circumstances where a party, properly advised, should have known that he/she had no chance of success; | |||||
| ||||||
| 8 | I will give further consideration to the authorities relating to indemnity costs in the discussion below. |
Discussion
9 I do not propose to discuss each of the subparagraphs of s 117(2A) individually, although I have taken all of them into account insofar as they are relevant.
10 The wife’s application for costs is almost irresistible. This fact was recognised by the husband in his submissions, where he indicated that although he did not consent to the making of the order sought, he did not oppose the making of an order “for some costs”. Apart from delineating the portion of the proceedings which should be the subject of the costs order, the real issue is whether the husband should be required to pay costs on an indemnity basis.
11 The matters I have particularly taken into account in determining that, at the very least, the husband should pay the wife’s costs on a “party and party” basis were the fact the husband was wholly unsuccessful and the fact his circumstances are far superior to those of the wife. (The full extent of the difference in their positions is not yet apparent as the husband has not given details of his current financial circumstances.)
12 In seeking costs on an indemnity basis, counsel for the wife asked the Court to note that the wife’s:
“financial circumstances are such that she cannot afford to meet
solicitor party[sic] costs in these proceedings, without significant
detriment to her ability to support even a modest standard of
living.”
(Page 7)13 Whilst I accept
there is a factual foundation for this proposition, it is not on its own sufficient to warrant an order for costs being made on an indemnity basis. The wife made her own decision to engage solicitors who charge in excess of the prescribed scale of costs. Had she made enquiry, she would have found solicitors who would have been prepared to charge scale rates for undertaking litigation of this nature.
14 In seeking indemnity costs, the wife otherwise relied upon “the circumstances numbered (d) and (f) within the list of considerations enumerated by the Court” in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 (“Colgate-Palmolive”). There is no such numbered (or lettered) list of considerations in the authorised report of the judgment of Sheppard J in Colgate-Palmolive. The reference in the wife’s submissions is a reference to the head note prepared by the editor of the Australian Law Reports’ version of the judgment, which included a summary of the circumstances which could give rise to an order for indemnity costs. Those circumstances relied upon by the wife are:
“(d) the fact that the proceedings were commenced in wilful disregard of known facts or clearly established law:
(e) the making of allegations that never ought to be made or the undue prolongation of the case by groundless contentions: (f) an imprudent refusal of an offer to compromise.”
15 The wife did not expand in her submissions on the reasons why each of these circumstances was said to be relevant in the present case. In my view, the only one of the factors relied upon which bears consideration is the first – namely the suggestion that “the proceedings were commenced in wilful disregard of known facts or clearly established law”.
16 In the present case there is no evidence to establish that the husband made his application for summary dismissal of the wife’s application for spousal maintenance in “wilful disregard” of the clearly established law. However, in considering this factor, it is necessary to keep in mind that the list contained in the head note of the Australian Law Reports’ version of Colgate-Palmolive is no more than a list of some of the circumstances which have been found in
(Page 8)
earlier cases to justify the award of indemnity costs. Consideration of the entire judgment makes quite clear that Sheppard J did not suggest it was a necessary pre-condition to the ordering of indemnity costs that it be established that there had been a “wilful disregard” of either known facts or clearly established law. Apart from any other consideration, the privilege attaching to communications between legal practitioners and their clients would make it difficult, if not impossible, to ascertain what motivated a litigant to pursue what appeared to be a case with no merit.
17 Sheppard J’s discussion of the relevant principles commenced with a quotation from Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400- 1 (“Fountain”) where Woodward J said:
“I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”.
18 Sheppard J observed that the remarks of Woodward J had been the subject of consideration and comment in a number of cases. The first he mentioned was Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Fed C of A, 3 May 1991, unreported). In that case, French J noted that the categories of cases in which the discretion to order indemnity costs are not closed, but nevertheless his Honour adopted the statement of principle made by Woodward J in Fountain as being an appropriate guide to the exercise of the discretion.
19 Sheppard J next referred to Council of the Municipality of Botany v Secretary Department of the Arts [etc] (1992) 34 FCR 412 where Gummow J held at 415 that the discretion to order indemnity costs “is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party”.
20 Sheppard J then turned to another decision of French J in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) (1993) 46 IR 301 (“J-Corp”) (“J-Corp”), in which his Honour again commented on the decision in Fountain in the following terms:
| (Page 9) |
“Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.”
21 Sheppard J, later in his judgment, proceeded to distil some “principles or guidelines” from the authorities to which he had referred, with a view to cataloguing some of the circumstances which have been thought to warrant the exercise of the discretion. Amongst those he noted were “the fact that the proceedings were commenced or continued … in wilful disregard of known facts or clearly established law”. As authority for that proposition his Honour referred to his earlier citations from the judgments of Woodward J in Fountain and French J in J-Corp.
22 Reference to those citations from the judgments of Woodward and French JJ indicates clearly that their Honours were not in any way suggesting that it was necessary to show a “wilful disregard of known facts or clearly established law”. Woodward J would have considered it sufficient to contemplate awarding indemnity costs in circumstances where the party “properly advised, should have known that he had no chance of success” and French J was of the view that the discretion to order costs on this basis was enlivened when, “for whatever reason, a party persists in what on proper consideration should be seen to be a hopeless case” [my emphasis added]. These views were clearly adopted by Holden CJ in Munday v Bowman (supra).
23 Given the highly discretionary nature of the power to order costs in family law proceedings, it is not appropriate to suggest that there is a “test” which must be passed before indemnity costs can be ordered. For my part, however, I find the remarks of Woodward and French JJ and Holden CJ of considerable assistance in deciding whether or not to award indemnity costs. In applying those comments to the circumstances of this case, I have formed the view that had the husband been properly advised he should have known that he had no chance of having the wife’s application summarily dismissed and that, for whatever reason, he persisted in pursuing what should have been seen as being a hopeless case.
| (Page 10) | |
| 24 | In these circumstances, and taking into account the obvious disparity in the parties’ financial position, I consider it would be an appropriate exercise of my discretion to order the husband to pay the wife’s costs on an indemnity basis. |
Quantum
25 The wife seeks costs of $10,445. I accept the submission made on behalf of the husband that it is apparent that in seeking this amount the wife is claiming costs not only relating to the successful defence of the husband’s application for summary dismissal, but also costs associated with the substantive proceedings. It is not appropriate for these costs to be sought at this stage of the proceedings. Whether or not the wife will be entitled to costs in relation of the substantive application can only be determined after the entire dispute has been resolved.
26 Furthermore, whilst I have indicated that there is a basis for costs to be calculated on an indemnity basis, I am not satisfied that the wife should be given “open slather” or be permitted to claim costs that were not necessarily incurred in the conduct of the proceedings. In this regard, I note that perusal of the schedule of costs provided by the wife’s solicitors suggests that there may be a number of items that require justification.
27 By way of one example only, I note that the wife’s solicitor claims $120 for “preparation for Court” on 25 October 2006 and $750 for attending at Court on 25 October 2006. The Court record indicates that the only matter listed before the Court on 25 October 2006 was the husband’s Form 2 Application filed on 20 October 2006 seeking an extension of time within which to appeal my substantive judgment. That hearing was vacated two days before the scheduled date and the matter was re-listed for 27 October 2006. On 26 October 2006 the wife’s solicitors wrote to the Court advising that the wife proposed to consent to the application and they were instructed not to attend the hearing. I am therefore mystified as to the basis on which the wife’s solicitor is claiming $870 for preparing for Court and attending at Court on 25 October 2006.
28 It is my practice, wherever possible, to quantify the amount of costs to be paid rather than condemning the parties (and the Court) to the long-drawn out and expensive process of assessment of costs by a Registrar. In the circumstances of this case, however, I regret that I
(Page 11)
see no alternative than for the costs to be assessed by a Registrar, as it will be necessary for the wife’s solicitors to satisfy the Court that each of the items of costs they claim to have incurred were reasonably incurred in opposing the husband’s application.
Postscript
29 In view of the matters referred to in para 27 of these reasons, I considered it appropriate to give the wife’s solicitors the opportunity to explain the apparent discrepancy in the schedule of costs which they have provided. I delayed giving my reasons pending receipt of submissions from the solicitors. My Associate has now received correspondence from the wife’s solicitor which indicates that the two items of work charged for on 25 October 2006 “were not applicable to this case”. The correspondence went on to acknowledge that the costs claimed after the hearing on 4 October 2006 were also not properly included in the Schedule of Costs. In the absence of any explanation for the error, I remain of the view that it is necessary for all of the costs to be assessed by a Registrar to ensure that the costs claimed were incurred and were reasonably incurred.
| Order |
30 For the reasons above, I propose making the following order:
The husband pay the wife’s costs of the application for summary dismissal to include all costs incurred by the wife except insofar as they are of an unreasonable amount or have been unreasonably incurred so that, subject to the above exceptions, the wife be completely indemnified by the husband for her costs.
I certify that the preceding [30] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
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