Dovgan & Dovgan

Case [2022] FedCFamC1F 276

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Dovgan & Dovgan [2022] FedCFamC1F 276

File number(s): SYC 866 of 2017
Judgment of: HARPER J
Date of judgment: 29 April 2022
Catchwords: FAMILY LAW – COSTS – Costs of third parties to a marriage – Where Second to Fourth Respondent corporate entities seek costs against the Applicant Wife – Where wife discontinued her claim against Second and Fourth Respondents three weeks prior to final hearing – Third parties argue an alternate basis for costs under s 79 of the Judiciary Act 1903 (Cth) and s 98 of the Civil Procedure Act 2005 (NSW) – Where this basis would lead to application of the rule that costs follow the event – Argument rejected because “proceedings under this Act” under s 117 embrace any matrimonial cause and its associated aspects as one justiciable controversy – Costs order intended to compensate, not punish – Where third parties argue wife failed to comply with court orders – Wife’s joinder of the third parties was not unreasonable and made by consent – Although wife foreshadowed discontinuance against Second and Fourth Respondents on 11 July 2020, Notice of Discontinuance was not filed until 23 July 2020 – Delay not substantial such that it would warrant a costs order – Where wife was wholly unsuccessful against the third parties – Four offers in writing made by the third parties – Whether offers reflected a genuine compromise – Wife unreasonable in failing to accept last of the four offers – Court will more readily award costs to a third party – Order for party/party costs for Second and Fourth Respondents up to discontinuance – Order for party/party costs for Third Respondents.
Legislation:

Family Law Act 1975 (Cth) ss 4, 78, 79, 117

Judiciary Act 1903 (Cth) s 79

Civil Procedure Act 2005 (NSW) s 98
Cases cited:

C Pty Ltd & PGW (as liquidator of S Pty Ltd (in liq)) (2011) FLC 93-485; [2011] FamCAFC 231

Cachia v Hanes (1994) 179 CLR 403; [1994] HCA 14

Costigan & Costigan [2017] FamCA 886

D & D (Costs) (No 2) (2010) FLC 93-435 [2010] FamCAFC 64

Dovgan & Dovgan [2021] FamCA 306

Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish and Anor (2005) 33 Fam LR 123; [2005] FamCA 158

Hampton & Farley (No 3) (2013) 52 Fam LR 366; [2013] FamCA 890

Harris & Dewell (No 2) [2018] FamCAFC 180

Klainec & Klainec [2021] FedCFamC1A 44

Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 116

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178

Medlon & Medlon (No 6) (Indemnity Costs) (2015) 54 Fam LR 1; [2015] FamCAFC 157

Moorcroft & Moorcroft (2020) 60 Fam LR 361; [2020] FamCAFC 83

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Prantage & Prantage(Costs) [2014] FamCA 850

Reza & Sadir [2019] FamCA 404

Robinson & Higginbotham

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AGLC
Dovgan & Dovgan [2022] FedCFamC1F 276
Case
[2022] FedCFamC1F 276
Decision Date

CaseChat Overview and Summary

The case of Dovgan & Dovgan involved an application for costs by third parties, B Pty Ltd, F Pty Ltd, and D Pty Ltd, against the wife following a final judgment in a family law matter. The wife had initially joined these companies as third parties to the proceedings, and they sought costs from her for their joinder and for the subsequent application to determine those costs. The third parties argued for their costs to be awarded on various bases, including indemnity costs, and raised an argument for the first time that their costs should be assessed under the Civil Procedure Act 2005 (NSW) rather than section 117 of the Family Law Act 1975 (Cth). The wife, who was self-represented at the time, filed further submissions in response to this new argument.

The legal issues the court had to decide included whether the third parties had established circumstances justifying a costs order in their favour and, if so, what basis the costs should be awarded on. The court considered the financial circumstances of the parties, whether any party was in receipt of legal aid, and the conduct of the parties. The third parties relied on various aspects of the wife's conduct, such as joining them in the proceedings despite their prior assertions about the claims she proposed to make against them. The court noted that costs are compensatory and not to be used to punish, as emphasised in Oshlack v Richmond River Council.

The court found that no party had provided clear evidence of their financial circumstances, and therefore this factor did not significantly impact the decision on costs. The court also noted that the receipt of legal aid was irrelevant in this case. Regarding the conduct of the parties, the court considered the arguments made by the third parties but emphasised that an order for costs is compensatory and should not be used to punish. The court found that while there was some force in the third parties' arguments, concepts of punishment or reward should be avoided in considering the factors in section 117(2A) of the Family Law Act. The court also noted the new argument regarding the assessment of costs under the Civil Procedure Act 2005 (NSW), but did not make a final decision on this issue.

In summary, the court found that the third parties had not established sufficient circumstances to justify a costs order in their favour. The court did not make a final decision on the basis for assessing their costs, but noted the arguments made by the parties on this issue. The wife, who was self-represented, had filed further submissions in response to the third parties' new argument, and the court may consider this in making its final decision on the costs application.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

On 14 May 2021, I delivered final judgment in the substantive proceedings: Dovgan & Dovgan [2021] FamCA 306 (“the primary judgment”) and made orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The relevant background is set out at [6]–[50] of the primary judgment. The application for costs by B Pty Ltd and F Pty Ltd was not pressed until after delivery of final judgment. D Pty Ltd then filed an Application in a Case on 16 June 2021 seeking the following orders:1. That [Ms Dovgan] pay [D Pty Ltd]’s costs of and incidental to that corporations joinder to proceedings SYC 866/2017 on a solicitor/ client basis as assessed and fixed by the Court.2. In the alternative to paragraph 1, that [Ms Dovgan] pay [D Pty Ltd]’s costs of and incidental to that corporations joinder to proceedings SYC 866/2017 on a party/party basis as assessed and fixed by the Court.3. In the alternative to paragraphs 1 and 2, that [Ms Dovgan] pay [D Pty Ltd]’s costs of and incidental to that corporations joinder to proceedings SYC 866/2017 in accordance with the Scale as assessed and fixed by the Court.4. In the alternative to paragraphs 1, 2 and 3, that [Ms Dovga]n pay [D Pty Ltd]’s costs of and incidental to that corporations joinder to proceedings SYC 866/2017 as from 17 August 2020 on a solicitor/ client basis as assessed and fixed by the Court.5. That [Ms Dovgan] pay [D Pty Ltd]’s costs of and incidental to this Application in a Case. On 9 June 2021, the wife filed a Notice of Appeal. Initially, the Court waited for the disposition of the appeal before determining any application for costs. The appeal was abandoned on 16 September 2021. On 17 January 2022, I made orders by consent for the applications for costs to be dealt with in chambers by written submissions. Although the position of B Pty Ltd and F Pty Ltd regarding costs differed from D Pty Ltd’s position in material respects, the third parties filed collective submissions on 31 January 2022 which largely did not differentiate their positions. The wife’s submissions were received on 16 February 2022. The third parties filed submissions in reply on 28 February 2022. These submissions made an argument, not previously articulated, for their costs to be awarded under the Civil Procedure Act 2005 (NSW) rather than s 117 of the Act. I will return to this issue below. On 1 March 2022, the wife sought and was granted leave to file further written submissions in relation to this argument. It should be noted that the wife discharged her solicitors following the final hearing and was self-represented thereafter, although she engaged counsel for the purpose of responding to the costs applications.THE LAW Usually, s 117 of the Act is the applicable provision governing arguments about costs in this Court. However, as mentioned, the third parties contended that the primary relief sought by the wife as set out in her Application in a Case filed on 19 May 2020 was equitable relief “…by virtue of a resulting trust or by reason of the principles set out in Barnes & Addy (1874)”, and was also described in that application as consequential relief in equity, the Corporations Act 2001 (Cth), and the Family Law Act. Accordingly, they argued, costs should follow the event because s 79 of the Judiciary Act 1903 (Cth) and s 98 of the Civil Procedure Act 2005 (NSW) should govern costs in relation to the claims made against them.

Ratio Decidendi

Legal Principle Established

The wife made no claim for costs. Nor did the husband. The questions, therefore, are whether any of the third parties have established circumstances which justify departing from the position that each party pay their own costs and, if so, what order for costs should be made in their favour. The costs of B Pty Ltd and F Pty Ltd are sought on an indemnity basis, whilst costs of D Pty Ltd are sought on five alternate basis: solicitor/client, party/party, in accordance with the Scale, on a solicitor/client basis from 17 August 2020 (when a further offer to settle was made), or as determined by the Court.SECTION 117(2A) CONSIDERATIONSSection 117(2A)(a) – the financial circumstances of each of the parties No party gave clear evidence of their current financial circumstances. The third parties contend I should infer that the wife has the capacity to pay the costs sought because, by reason of the primary judgment, she has a property located at G Street, Suburb H, valued at $6 million, and received the sum of $12,802,462 pursuant to the final orders. The third parties themselves have not suggested that they are in any financial difficulty or hardship, nor have they adduced any evidence of their financial circumstances. I do not consider that the financial circumstances of the parties here has much bearing on the question of costs.Section 117(2A)(b) – whether any party is in receipt of legal aid This is irrelevant. Section 117(2A)(c) – the conduct of the parties The third parties rely upon various aspects of the wife’s conduct as militating in favour of a costs order in their favour. Before considering these arguments, it should be emphasised that an order for costs is compensatory and not to be used to punish: Latoudis v Casey (1990) 170 CLR 534; Cachia v Hanes (1994) 179 CLR 403. In Oshlack v Richmond River Council (1998) 193 CLR 72 at [1] (“Oshlack”), Brennan CJ said “[c]osts are awarded to indemnify a successful party in litigation, not by way of punishment of an unsuccessful party”. Thus, putting aside for the moment the question of indemnity costs, which is evaluated according to some different considerations, concepts of punishment or reward should be avoided in considering the factors in s 117(2A).The wife joined the Second to Fourth Respondents in circumstances where her contentions against them had been answered before she commenced proceedings This contention was given little elaboration in the third parties’ submissions. It was not clear what the submission meant other than that, in their submissions in reply, the third parties point out that by letter on 18 May 2020, before the wife filed her application for their joinder, their solicitors set out their assertions about the claims they believed the wife proposed to make against them. Yet despite this, so they argue, the wife pressed ahead in her application for joinder, “without pausing for a prudent assessment of the merits of her claims.” There is some force in this argument, but assertions in correspondence in a solicitor’s letter are made on instruction, and cannot have, for example, the same force as sworn or affirmed evidence in an affidavit.