Daines & Daines (Costs)
[2014] FamCAFC 170
•10 September 2014
FAMILY COURT OF AUSTRALIA
| DAINES & DAINES (COSTS) | [2014] FamCAFC 170 |
| FAMILY LAW – APPEAL – COSTS – where the trial judge made orders and delivered reasons purporting to effect a final property settlement between the parties – where those orders were not final property orders – where the matter subsequently came back before her Honour for a further hearing in order to finalise the orders giving effect to the distribution previously ordered by the trial judge – where the hearing was necessitated primarily as a result of the husband’s claim that the trial judge was functus officio – where that claim was found to be without merit by both the trial judge and this Court – where the trial judge ordered that the husband pay the wife’s costs of the subsequent hearing – where the husband appeals that order – where the primary contention is that the trial judge failed to finalise the parties’ financial relationship and that necessitated the subsequent hearing – where that submission is not borne out by reference to the record – no merit in the appeal. FAMILY LAW – APPEAL – COSTS – where the trial judge ordered that the husband pay the wife’s costs of the property proceedings – where the trial judge had, in accordance with a joint balance sheet, included unpaid legal fees of the parties as a liability – where no issue was raised with that approach at the hearing of the wife’s costs application – where the issue raised for the first time on appeal – whether an error of law has been established – where, in including the unpaid legal fees as a liability, and not notionally adding back the corresponding amount, her Honour’s property orders have the effect that each party is liable for a proportion of the other’s costs – where her Honour did not consider that issue when ordering that the husband pay the wife’s costs – where error established – matter remitted. FAMILY LAW – APPEAL – COSTS OF APPEAL – where the wife seeks an order that the husband pay her costs of the appeals on a solicitor and own client basis – where the husband has been wholly unsuccessful in three of his four appeals – where the husband raised issues of impecuniosity – where impecuniosity is not itself determinative of whether an order for costs ought be made – whether there are circumstances justifying a departure from s 117(1) of the Family Law Act 1975 (Cth) – where the husband received over $500,000 as a result of the property orders made by the trial judge – where the two costs appeals proceeded via written submissions – where the circumstances justify a departure from s 117(1) in respect of the two appeals previously determined – where there is no basis for ordering that the costs be awarded on a solicitor and own client basis – where there are no circumstances justifying a departure from s 117(1) in respect of the unsuccessful costs appeals, which proceeded via written submissions – husband ordered to pay the wife’s costs of the two previous appeals as assessed. |
| Family Law Act 1975 (Cth) |
| Allesch v Maunz (2000) 203 CLR 172 |
| APPELLANT: | Mr Daines |
| RESPONDENT: | Mrs Daines |
| FILE NUMBER: | SYC | 3797 | of | 2011 |
| APPEAL NUMBER: | EA EA EA EA | 136 16 37 38 | of of of of | 2012 2013 2013 2013 |
| DATE DELIVERED: | 10 September 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ainslie-Wallace, Murphy and Loughnan JJ |
| HEARING DATE: | 2 October 2013 and written submissions filed 9 May, 8 July and 14 July 2014 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 19 September 2012, 7 December 2012, 4 March 2013 and 21 March 2013 |
| LOWER COURT MNC: | [2012] FMCAfam1014, [2012] FMCAfam 1486, [2013] FMCAfam 217 and [2013] FMCAfam 292 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Sansom |
| SOLICITOR FOR THE APPELLANT: | Price & Company, Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Miller |
| SOLICITOR FOR THE RESPONDENT: | Robyn Sexton & Associates, Solicitors |
Orders
The appeal in EA 16 of 2013 be allowed.
Paragraphs 1 and 2 of the Orders made by Federal Magistrate Cassidy (as her Honour then was) on 7 December 2012 be set aside.
The Application in a Case filed by the respondent wife on 16 October 2012 be remitted for rehearing by a judge of the Federal Circuit Court, other than Judge Cassidy.
The appeal in EA 38 of 2013 be dismissed.
The appellant husband pay the respondent wife’s costs of and incidental to the appeals in EA 136 of 2012 and EA 37 of 2012 as agreed in writing or, failing agreement, as assessed.
There be no order as to costs in respect of the appeals in EA 16 of 2013 and EA 38 of 2013.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Daines & Daines (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Numbers: EA 136 of 2012; EA 16 of 2013; EA 37 of 2013; and, EA 38 of 2013
File Number: SYC 3797 of 2011
| Mr Daines |
Appellant
And
| Mrs Daines |
Respondent
REASONS FOR JUDGMENT
As amended under Rule 17.02 on the 13th October 2014.
On 11 April 2014, this Court made orders and delivered reasons dismissing two of the appellant husband’s four appeals. Those two appeals will be referred to in these reasons as the “substantive appeals”. Orders were also made that day, consistent with submissions made during the hearing of the appeals, for the filing of written submissions in respect of the two remaining appeals (EAs 16 and 38 of 2013). Those appeals concern orders for costs made by the trial judge and will be referred to as the “costs appeals”. As was, with respect, properly conceded by counsel for the husband during the hearing of the substantive appeals, the merits of the costs appeals depends largely (although, for reasons that will become clear, not entirely) upon the outcome of the substantive appeals. Submissions were, ultimately, received from each of the parties in respect of the costs appeals.
The substantive appeals challenged property orders made by the trial judge. Our reasons of 11 April 2014 set out in detail the relevant context to those appeals and we need not repeat it. It is sufficient for present purposes to note that on 19 September 2012, her Honour made what purported to be orders distributing the parties’ property between them in the proportion of 62.5:37.5 per cent in favour of the wife. The husband subsequently sought a stay of those orders, whilst the wife sought her costs of the property proceedings; the stay application was dismissed and the husband was ordered to pay the wife’s costs of the proceedings. That costs order is the subject of one of the instant appeals.
For reasons given by us on 11 April 2014, the orders made by her Honour on 19 September 2012 could not properly be considered final property orders. As we said in those reasons, her Honour herself recognised that final property orders were yet to be made giving effect to her determination (appeal reasons at [32]-[33]). Such orders were, subsequently, made by her Honour on 4 March 2013 following a further hearing before her Honour on 19 and 21 February 2013. Upon application by the wife, an order was made on 21 March 2013 that the husband pay the wife’s costs of that further hearing. That order is the subject of the second costs appeal.
The costs appeals
The 21 March 2013 costs order
The Notice of Appeal filed against the costs order made on 21 March 2013 contains one ground of appeal, namely:
The Court erred in the making of any order against the husband as the further costs incurred by both parties were incurred as a result of the Courts [sic] failure to make proper or appropriate Orders ending the parties [sic] financial relationship on 19th September, 2012 and in respect of such proceedings the Court was “functus officio” and otherwise its power “spent” by the making of the orders of 19th September, 2012.
Leaving aside the inherent inconsistency in the ground, the latter aspect, namely, that her Honour erred in making an order that the husband pay the wife’s costs of the 19 and 21 February 2013 hearing, can be readily disposed of by reference to this Court’s orders and reasons in respect of the substantive appeals. More specifically, this Court determined that her Honour was not functus officio when the orders were made on 4 March 2013.
There is, then, no merit to the latter component of the ground.
As to the contention that her Honour erred in making the costs order because she failed to make property orders finalising the parties’ financial relationship on 19 September 2012, reference to the record reveals that the hearing on 19 and 21 February 2013 was necessitated primarily by the husband’s contention that the orders of 19 September 2012 constituted final property orders and that any further orders would be void as a result of her Honour being functus officio (see, for instance, [6] of her Honour’s reasons delivered on 4 March 2013).
In addition to asserting that her Honour was functus officio, the husband also asserted before her Honour, in resisting the wife’s costs application in respect of the 19 and 21 February 2013 hearing, that her Honour should recommend that each party receive a costs certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) because “…the proceedings were effectively completed and the Court has failed in its obligation under s.81 of the Family Law Act 1975 (Cth) to make the orders” (see [5] of her Honour’s reasons delivered on 4 March 2013).
No challenge is made to her Honour’s reason for rejecting that proposition, contained at [6] of those reasons:
I am not satisfied that that is the case. The matter was adjourned to allow the parties to put in place formal orders and to try and finalise the issue of chattels, which was never finalised by the parties at the beginning of the hearing. This in itself is something that I will never understand when you look at the costs that have been involved in this issue subsequently.
Her Honour expressly addressed the “chattels issue” in her substantive property reasons delivered on 19 September 2012:
65.The Orders the parties sought, as set out in their outline of case, unfortunately listed a whole lot of orders in relation to assets that I have no evidence about. In particular, the parties’ cars, chattels and furniture. I am not able to make any decisions where the parties differ with respect to those various orders…
66.With respect to those other matters, if there is a dispute that the parties cannot resolve, they will have to bring the matter back and put evidence before me to enable me to come to a decision about how the parties’ chattels are to be divided.
As her Honour foreshadowed, due to a lack of evidence from both parties, there would be a need for the parties to reach agreement regarding chattels or, otherwise the matter would have to come back before her Honour. No challenge is made to [8]-[9] of the reasons delivered on 4 March 2013, wherein her Honour recorded the submission of the wife that the terms of the orders proposed by her in respect of the chattels, and which were ultimately made by her Honour, were in accordance with the husband’s application.
Further, as earlier noted, when her Honour’s reasons of 4 March 2013 are read with the record as a whole, it is readily apparent that the hearing on 19 and 21 February 2013 arose primarily as a result of the husband’s claim that her Honour was functus officio. That claim was unsuccessful before her Honour and the husband’s appeal on that issue was dismissed by us.
It was entirely open to the parties to reach agreement in respect of the perfected form of those orders and it appears that the impediment to that occurring was the husband’s functus officio argument.
In ordering that the husband pay the wife’s costs of the hearing on 19 and 21 February 2013, her Honour had express regard to the fact that “…the husband was wholly unsuccessful in wishing to agitate the argument about the Court being functus officio” and also referred to the fact that, pursuant to the orders made on 21 February 2013, the parties “…both received a significant sum of money…” Both are matters referred to in s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) as factors which the court “shall” have regard to in considering whether a costs order ought be made, contrary to the presumption in s 117(1).
Nothing to which we have been taken, nor anything we have read ourselves, satisfies us that her Honour’s discretion miscarried in ordering that the husband pay the wife’s costs of the 19 and 21 February 2013. We do not consider there to be any merit in the appeal in EA 38 of 2013, and it will be dismissed.
The 7 December 2012 costs order
The remaining costs appeal concerns her Honour’s order that the husband pay the wife’s costs of the property proceedings.
The Notice of Appeal in respect of these orders also contains one ground, which provides:
The Court erred in ordering that the Husband pay the costs of the proceedings by Order made 7th December, 2012 in circumstances where the Court had already taken into account the wife’s costs of $66,000 within the balance sheet and a much lesser (and apparently incomplete) figure of $19,430 for the husbands [sic] costs and in circumstances where the Court could not ascertain where the burden of those costs fell as between the parties and further without making findings as to the relative capacity of the parties to bear those costs, and prior to the hearing of this Appeal without at least linking the making of such order to the Appeal or granting the husband leave to revisit that question of whether the order is appropriate upon the completion and subject to the appeal.
With the greatest respect, it is not at all clear to us what the latter component of that ground means; to the extent that it is a contention that the trial judge erred by not making the costs order subject to the outcome of any appeal by the husband, we note that the husband did not apply to stay the costs order. No error is otherwise evident in that part of the ground.
In the substantive property reasons delivered on 19 September 2012, her Honour set out at [32] the assets and liabilities comprising the parties’ property. Relevant to the instant appeal, her Honour included under “Liabilities”, against the description “[u]npaid legal fees”, an amount of “$19,430 + WIP” for the husband and the sum of $66,000 for the wife. Her Honour also “added back” “[p]aid [l]egal [f]ees” in respect of both parties, although those amounts were different to the unpaid legal fees included as liabilities ($1,518 for the wife and $21,500 for the husband).
The amount of “[u]npaid legal fees” were agreed as between the parties as at the date of the trial (reasons delivered on 19 September 2012 at [25]) and no issue was, it seems, taken to her Honour including the unpaid sums as liabilities for the purposes of ascertaining the net property pool of the parties. Indeed, it is important to observe that the amounts were so treated in a joint balance sheet provided to her Honour by the parties.
Including the unpaid sums as liabilities means that the parties share that liability in the proportion determined by her Honour to be just and equitable; her Honour has, in effect, determined that each party should bear a portion of the other’s costs. More specifically, her Honour’s determination that the net property (which incorporated the parties’ unpaid legal fees) should be distributed between the parties in the proportion of 62.5:37.5 per cent in favour of the wife had the result that the husband has, in effect, borne responsibility for 37.5 per cent of the wife’s unpaid legal fees and the wife has borne responsibility for 62.5 per cent of the husband’s unpaid legal fees.
That would not have been an issue if the amounts added back for “paid” legal fees corresponded with the liabilities. However, particularly in terms of the wife’s legal fees, including the unpaid amounts as liabilities “…represented an imposition of costs one way or the other upon a party” (per the trial judge, cited with approval by Fogarty J in Farnell and Farnell (1996) FLC 92-681).
As Fogarty J went on to observe in Farnell (at 83,068):
…the circumstance that the parties have or have paid legal costs is a basic factor in determining, at the conclusion of the proceedings, whether an order for costs should be made within the parameters of s. 117.
Similarly, Kay J in Farnell opined (at 83,080) that:
The notional inclusion of costs already paid on account, or the exclusion of costs owing as a liability, is in my view a proper exercise of judicial discretion and well within the normal method by which property cases should be determined. To make any allowance for the liability for costs as was suggested by Lee Steere, in my view necessarily requires a breach of s. 117(1)….In my view the proper time to considering (sic) the impact of costs is when considering applications under s. 117 after the proceedings have concluded.
(Emphasis added).
Subsequently, in NCH & RCH (2004) FLC 93-204, Finn, Kay and May JJ held that:
59.Outstanding legal fees themselves are generally not taken into account as a liability.
60.If in the exercise of the discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.
We reiterate that no issue was raised before her Honour in including the parties’ unpaid fees as liabilities and the parties tendered a joint balance sheet which included them as such. Further, no issue was raised in the substantive appeal against her Honour’s property orders in respect of her Honour’s treatment of the unpaid legal fees. Similarly, no issue was raised at the hearing of the wife’s costs application, nor in written submissions filed by the husband in response to same, regarding the impact of her Honour having included the unpaid legal fees in the “pool”.
It seems clear that this issue is raised for the first time on this appeal. Whilst that might raise issues of the type discussed in University of Wollongong v Metwally (1984) 158 CLR 447, those difficulties might be overcome if, as appears to be contended in the husband’s written outline, the challenge before this Court is directed to a point of law and error is established (see, for example, Water Board v Moustakas (1988) 180 CLR 491).
This Court in Prantage & Prantage [2013] FamCAFC 105 observed in respect of an order for costs:
107. In Harris & Harris (1991) FLC 92-254 this Court said at 78,711:
orders for costs are peculiarly a matter which are within the discretion of the trial Judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.
108.Although this may state the proposition “at its highest” (Browne v Green (2002) FLC 93-115), this Court is usually most reluctant to interfere with a decision of a trial judge in relation to costs (Robinson & Higginbotham (1991) FLC 92-209).
Here, however, we are satisfied that, by reference to the authorities set out earlier in these reasons, her Honour made an error of law in failing to take into account in ordering the husband to pay the costs of the wife of the substantive proceedings, that he had, in effect, already contributed to some of those costs.
At no point in the reasons accompanying the order that the husband pay the wife’s costs of the substantive property proceedings did her Honour consider that the impact of her property orders was that the husband “paid” 37.5 per cent of the wife’s $66,000 bill; and, the wife “paid” 62.5 per cent of the husband’s $19,430 bill. Not only was no reason given for that outcome, there is little doubt that it was never intended. It is extremely unfortunate that neither party raised this issue with her Honour when submissions were made about the costs issue.
The payment by each party of a proportion of the other’s legal fees must, as it seems to us, be a crucially relevant consideration in the exercise of the s 117(2) discretion which her Honour has (primarily as a result of the actions or inactions of the respective legal practitioners) failed to take into account. The discretion must be seen to have miscarried as a result.
An error of law is established and the failure to raise the issue below should not prevent this Court correcting it (Moustakas).
We thus find merit in the appeal in EA 16 of 2013 and will allow it.
Plainly, given the costs already incurred by the parties, this Court should exercise for itself the discretion if that is possible. That is only possible when this Court can be satisfied that, on the evidence before it at the date of the hearing of the appeal, all of the relevant issues can be addressed (Allesch v Maunz (2000) 203 CLR 172).
Here, neither party seeks to put before the Court any evidence (or indeed address any submissions) emanating from that decision of the High Court. Among the matters that may need to be considered are the amount of the wife’s costs as assessed, the financial circumstances of the parties as at the date of the hearing of the appeal, and the submissions of each party in light of her Honour’s treatment of paid and unpaid legal fees.
It is necessary to order that the matter be remitted for rehearing of the wife’s application for costs of the property proceedings filed on 16 October 2012. Of course, it is within the parties’ power to reach agreement so as to avoid incurring further legal expenses.
Costs of the Appeals
The wife seeks her costs of the husband’s appeals, on a “solicitor and own client basis rather than the more usual party-party basis.”
The husband submits in response that there are no circumstances justifying a departure from s 117(1) of the Act. In so submitting, the husband asserts that the Court should have “specific[…] regard” to his financial circumstances (per s 117(2A)(a)). It is submitted (by reference, it ought be noted, to a Financial Statement that was attached to written submissions but which was not otherwise filed and was not, as a result, received into evidence by this Court) that the husband’s weekly expenses are double his weekly income. It is further submitted that the husband is dependent upon his “residual assets post-separation to fund that shortfall.”
The husband’s ultimate submission is that “…the imposition of any costs order relating to these appeal [sic] would impose an unjustifiable supererogatory financial burden upon the husband”; that is, it would “punish” the husband.
As this Court has said on numerous occasions, neither impecuniosity, nor incapacity to meet an order for costs, can, per se, be determinative of whether an order for costs ought be made; “…if either or both were, the impecunious litigant could litigate with impunity - and with immunity against a costs order. A party’s financial circumstances, are, of course, plainly relevant to a determination pursuant to s 117(2A), but neither that factor, nor any other factor, is determinative” (Cooper & Oakley (No. 2) [2012] FamCAFC 187 at [14]).
As a result of her Honour’s orders, the husband received 37.5 per cent of a net pool of $1,561,564 – approximately $586,000. The husband has been wholly unsuccessful in respect of three of his four appeals. The appeal which has succeeded proceeded on written submissions and has succeeded on a point raised for the first time on appeal. With the greatest respect to the legal representatives for the husband, the submissions filed on his behalf do not assist in a resolution of the issue. Similar considerations apply to the wife’s written submissions.
We therefore consider there to be circumstances justifying a departure from s 117(1) in respect of the wife’s costs of the appeals in EA 136/2012 and EA 37/2013. It is submitted on behalf of the wife that costs should be ordered on a “solicitor and own client basis rather than the more usual party-party basis”, “…to discourage the ‘brinkmanship’ style of litigation that permeated the proceedings…” With respect to counsel for the wife, the submissions (which, it ought be noted, are confined to a single paragraph) do not satisfy us that costs should be ordered on any basis other than as assessed.
We will, then, order that the husband pay the wife’s costs of and incidental to those appeals as agreed in writing or, failing agreement as assessed.
We do not consider there to be circumstances justifying a departure from s 117(1) of the Act in respect of the appeals in EA 16/2013 and EA 38/2013. Each party shall bear their own costs in respect of those appeals.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ainslie-Wallace, Murphy and Loughnan JJ) delivered on 10 September 2014
Associate:
Date: 13 October 2014
Key Legal Topics
Areas of Law
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Family Law
Legal Concepts
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Appeal
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Costs
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Remand
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