Drake and Drake (No.2)
[2017] FCCA 1950
•18 August 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DRAKE & DRAKE (No.2) | [2017] FCCA 1950 |
| Catchwords: PRACTICE & PROCEDURE – Costs – whether costs orders should be made where offer by husband significantly better than what wife received pursuant to orders. |
| Legislation: Family Law Act 1975, ss.79, 75(2), 117 Federal Circuit Court Rules 2001, r.21.02 |
| Cases cited: Braithwaite & Braithwaite [2007] FamCA 468 Kohan & Kohan (1993) FLC 92-340 Latoudis v Casey (1990) 170 CLR 534 Monaco v Arnedo Pty Limited, unreported Munday & Bowman (1997) FLC 92-784 Pawley & Pawley (No.2) [2017] FCCA 1100 Penfold & Penfold (1980) 144 CLR 311 Prantage & Prantage (2013) FLC 93-544 |
| Applicant: | MR DRAKE |
| Respondent: | MS DRAKE |
| File Number: | PAC 5137 of 2015 |
| Judgment of: | Judge Obradovic |
| Hearing date: | 8 March 2017 |
| Date of Last Submission: | 8 March 2017 |
| Delivered at: | Parramatta |
| Delivered on: | 18 August 2017 |
REPRESENTATION
| Appearing for the Applicant: | Ms Monostiriotis |
| Solicitors for the Applicant: | Slater & Gordon Lawyers |
| Appearing for the Respondent: | Mr Zoutendijk |
| Solicitors for the Respondent: | Bell Lawyers |
ORDERS
The Respondent is to pay the Applicant’s costs in the amount of $15,000 within 90 days.
The orders of 7 December 2016 are amended pursuant to the slip rule.
IT IS NOTED that publication of this judgment under the pseudonym Drake & Drake (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 5137 of 2015
| MR DRAKE |
Applicant
And
| MS DRAKE |
Respondent
REASONS FOR JUDGMENT
Introduction
On 7 December 2016 the Court delivered its Reasons for Judgment and made orders for the adjustment of the parties’ property interests pursuant to s79 Family Law Act 1975. Following those orders, the husband made an application for costs by filing an Application in a Case on 9 January 2017. That application was returnable on 8 March 2017.
During discussions with the legal representatives of the parties, it became clear to the Court that there was an issue with the orders as made not reflecting the intention of the Court.
Slip Rule
The Court has implied powers to control its own processes.[1] This includes correcting an order that does not reflect the intention of the Court.[2]
[1] See for example: Grassby v R [1989] 168 CLR at [16]; Teo & Guan (2015) FLC 93-653 at [35]
[2] Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at [12]; DJL v The Central Authority (2000) 201 CLR 226 at [25]
In addition, the Rules of this Court specifically permit the Court to vary or set aside an order if the order does not reflect the intention of the Court.[3]
[3] Rule 16.05(2)(e)
The slip rule exists to avoid injustice.[4]
[4] see Monaco v Arnedo Pty Limited, unreported, Full Court of the Supreme Court of Western Australia, 29 November 1994, per Malcolm CJ at 5
The Full Court of the Family Court recently discussed at length the application of the slip rule.
In Pawley & Pawely (No.2)[5], Thackray J[6] held as follows:
[5] [2017] FCCA 1100
[6] With whom Kent and Loughnan JJ agreed
[29] As Jordan CJ explained in Graziers Association of New South Wales v Australian Legion of Ex-Serviceman and Women [1949] NSWStRp 16; (1949) 49 SR (NSW) 300 at 303:
The general rule, as established by the authorities ... is that “when an arbitrator or judicial officer has given his award or adjudication ... he is functus officio, and cannot add to, amend, or detract from what he has done”; although in some jurisdictions an adjudication is not regarded as having been finally made until it has been passed and entered ... This rule applies to judges exercising judicial authority conferred by statute, unless otherwise provided by statute...
[30] However, the fact that a judge may be functus officio does not prevent the judge from correcting his or her orders by application of the slip rule. The real issue, therefore, is whether there was error in his Honour’s purported reliance on the slip rule in adding to the orders he originally made.
[31] All courts have implied jurisdiction to amend orders which do not accurately state what was actually decided or what the court intended to decide: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385, 389–399; DJL v The Central Authority (2000) 201 CLR 226. Consistent with this, r 16.05(2)(e) of the Federal Circuit Court Rules provides that the court “may vary or set aside its judgment or order after it has been entered if ... the order does not reflect the intention of the Court”.Rule 16.05 goes further in permitting the variation or setting aside of an order on the basis that the order is “interlocutory”, but that is not a power the judge sought to rely upon here.
[32] Although the topic was not the subject of submissions, I consider that r 16.05 does not constitute a code which replaces the implied power of the Federal Circuit Court to control its own process, including the power to take action to prevent injustice. See the authorities discussed in Teo & Guan (2015) FLC 93-653 at [36] et seq and Newmont Yandal Operations Pty Ltd v The J Aron Corporation and the Goldman Sachs Group Inc and Ors (2007) 70 NSWLR 411 at [18].
[33] Therefore, although not provided for in r 16.05, I accept that the power of a court to correct its own order also extends to cases where a matter was not dealt with as a result of inadvertence: Raybos Australia Pty Ltd and Anor v Tectran Corportion Pty Ltd and Ors (1988) 77 ALR 190. However, there is a distinction between cases where an amendment of an order is proposed to give effect to the court’s original intention, and cases where the court proposes to correct an order by including a provision dealing with a matter that was not dealt with at the original hearing. In cases of the latter type, the power to amend appears to be limited to correcting only ancillary or consequential matters and not “substantial” questions. However there is no such limitation where a change is to be made to reflect the original intention of the court: Owston Nominees No 2 Pty Ltd and Anor v Branir Pty Ltd and Ors (2003) 129 FCR 558 at [25].
[34] In determining whether the original order reflected what the court decided (or whether it is appropriate to make an additional order to deal with an issue that was overlooked), it is necessary to look at the surrounding circumstances which include the reasons, the pleadings and, if necessary, the evidence and how the case was conducted: Owston Nominees at [27].
…
[54] ... As Spigelman CJ (with the concurrence of Santow AJ and Handley AJA) said in Newmont Yandal Operations Pty Ltd v The J Aron Corporation and the Goldman Sachs Group Inc and Ors at [95]:
... the relevant question is what the Court intended to do and/or what the Court would have done, if the issue had arisen at the time the orders were made. Anything a judge, even the same judge, says about what s/he would do to correct the original orders is no more than evidentiary and may not even be admissible over objection...
[55] Furthermore, the authorities make plain that the slip rule can be applied only where the amendment is one upon which no real difference of opinion can exist. Hence, it cannot apply where there is any question involving the exercise of discretion by the judge: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at 390–391. This proposition is true not only at common law but applies also to matters in which rules equivalent to r 16.05 apply (for example, r 39.05 of the Federal Court Rules 2011 (Cth) and its predecessor, Order 35 r 7 of the Federal Court Rules 1979 (Cth)).
Should the orders be varied?
In the written submissions on behalf of the wife, submissions are made in respect of the slip rule being invoked. It was submitted on behalf of the wife that:
a)the Judgment and the orders are consistent in their clarity making it clear what the entitlement of each of the parties to the sale proceeds of the Property A property;
b)paragraph 75 of the Reasons records what should occur if the net proceeds are less than $710,000; and
c)the orders made are consistent with the reasons expressed.
In the instance of the Judgment in question, the intention of the Court is set out in paragraphs 69 to 73 of the Reasons for Judgment published 7 December 2016.
One of the orders which the wife specifically sought was to retain the property, which the Court acceded to. However, such an order was made on the proviso that if the wife was not able to refinance and retain the property, then the husband was not to be disadvantaged by the order permitting the wife to retain the property in the first instance.[7]
[7] See paragraph 73 of Reasons for Judgment published 7 December 2016
The intention of the orders was for the husband to receive 85% of the net pool, whether the property was retained by the wife or if it had to be sold.
The orders as made do not reflect these intentions.
The inclusion of the word “net” in paragraphs 74 and 75 of the Reasons is clearly an error because it undermines the intention of the Court as set out in the balance of the Reasons. This has carried through in the wording of the orders and ultimately resulted in an order which does not only fail to reflect the intention of the Court but results in an injustice.
The agreed value of the property was $710,000. The value of the mortgage was $408,261. Therefore the net value of the property, for the purposes of adjusting the parties’ interests, was $301,739. This is the amount that was to be included in the orders, rather than $710,000.
The errors as identified above will be amended pursuant to the slip rule.
Costs
It is always helpful in an application for costs to set out the chronology of the proceedings:
Date
Event
22 October 2015
Husband files Initiating Application
Proceedings commenced in Family Court
12 January 2016
Wife files Response to Initiating Application
April 2016
Parties file their Financial Questionnaires
16 June 2016
Parties attend Conciliation Conference with Registrar; Matter transferred to Federal Circuit Court
22 July 2016
Husband files Application in a Case seeking wife make mortgage repayments
12 August 2016
Wife files Response to Application in a Case
15 August 2016
Orders made by Consent for sale of Property A and Wife to be liable for mortgage repayments and outgoings in respect of Property B
Husband’s costs of Application in a Case are reserved
30 August 2016
Matter set down for final hearing
21 October 2016
Husband files Amended Initiating Application
2 November 2016
Wife files Amended Response
23 November 2016
Final Hearing
7 December 2016
Reasons for Judgment Published; Orders made
9 January 2017
Husband files Application in a Case seeking costs
27 April 2017
Wife files Response to Application in a Case
The starting position with respect to costs, as set out in s117 of the Family Law Act 1975 (Cth), is that, subject to subsection 117(2), each party to proceedings under the Family Law Act shall bear his or her own costs.
The discretion to award costs is a broad discretion.[8]
[8] see for example Collins & Collins (1985) FLC 91-603.
The High Court held in Penfold & Penfold[9] that it is necessary for the Court to make a finding of justifying circumstances as an essential preliminary to the making of an order for costs. The Court is not required to specify the circumstances which justify the making of such an order.
[9] (1980) 144 CLR 311
As long as there is an essential preliminary finding that there are justifying circumstances to make a costs order, there is no additional or special onus which the Applicant needs to establish for an order for costs. It is not the law that a costs order can only be made in what has been described as a ‘clear case’. [10]
[10] See in general the comments made by the Full Court in Wrensted & Eades [2016] FamCAFC 46 and in particular where the Full Court approved the comments of the judge below at [103]
In Latoudis v Casey[11] the High Court stated as follows:
… in exercising its discretion to award or refuse costs, a court should look at the matter primarily from the perspective of the defendant. To do so conforms to fundamental principle. If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of an unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings.”[12]
[11] (1990) 170 CLR 534
[12] Referred to in the context of family law proceedings by Judge Kemp in Coggan & Coggan [2012] FMCAfam 984 at [17]
The discretion to determine a costs dispute is a very wide one.
In determining what order, if any, should be made under s117(2) the Court must have regard to the prescriptive but non-exhaustive list of considerations in sub-section (2A).
Rule 21.02(2) Federal Circuit Court Rules2001 provides that in making an order for costs the Court may set the amount of costs; or set the method by which the costs are to be calculated; or refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules .
Section 117(2A) Factors
Section 117(2A) of the Family Law Act provides the factors that the Court in ordering what costs, if any, should have regard to.
All relevant matters referred to in s117(2A) must be taken into account: Re David Costs[13]; and Braithwaite & Braithwaite[14] .
[13] (1998) FLC 92-809
[14] [2007] FamCA 468 at [115]
In Fitzgerald (as Child Representative for A (Legal Aid Commissioner of Tasmania) v Fish & Anor[15], the Full Court held that there is nothing to prevent any one factor being the sole determinate for an order of costs to be made.
[15] (2005) 33 Fam LR 123
Financial circumstances of each of the parties: s117(2A)(a)
It was submitted on behalf of the Respondent that she has no capacity to pay any costs order if such order was made.
The Court was not taken to any authority which might lend support to the proposition that if there is incapacity to pay there should be no order for costs. Impecuniosity of a party is not of itself a reason not to make a costs order.
The Applicant is in a superior financial position to the Respondent. He currently has a higher current income as well the benefit of a significant property adjustment order.
The Respondent has outstanding legal fees arising out of these proceedings.
The Respondent works. She therefore she has some capacity to pay. Indeed she has already paid some of her own legal costs.
The Respondent’s financial position is such that her liabilities outweigh any entitlement she will receive from the sale proceeds of the property, which was the subject of the property adjustment proceedings.
It was submitted on behalf of the Respondent that the legal fees owed by the Respondent give rise to an equitable lien, and that such payment has priority compared to any other debt or demand made upon the Respondent.
The law in respect of a solicitor’s lien is long standing:
“If... as a result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgement or award or compromise for the payment of money... [the solicitor] acquires a right to have his costs paid out of the money... the solicitor has an equitable right to be paid his costs out of the money...” Ex Parte Patience; Makinson v The Minister[16].
[16] (1940) 40 SR (NSW) 96 at pp99-100, per Jordan CJ; approved by the Full Court of the Federal Court in Worrell v Power & Power; and approved by the Full Court of the Family Court in Twigg & Twigg v Keady & Keady.
The Court accepts that there might exist in the circumstances of this case, what is sometimes known as a ‘fruits of the action’ lien by the solicitors for the Respondent over the proceeds of sale.
Submission was made on behalf of the Respondent that her liability in respect of her own legal costs would take priority over any other debt or demand made upon her.
This is only correct in so far as it relates to the proceeds of sale of the former matrimonial home and the other assets which were the subject of the Orders of this Court on 7 December 2016, being the “fruits of the action” but arguably only if those assets are not the subject of any other charge or security.
However, the existence of the lien is a matter which might be relevant to the Applicant being able to enforce any judgement for costs, rather than predominantly going to the issue of whether an application for costs is made out.
The existence of the solicitor’s lien is a matter which is of limited weight.
Conduct of the parties in relation to the proceedings: s117(2A)(c)
The Applicant commenced the property adjustment proceedings on 21 October 2015, seeking what amounted to essentially a 70/30 split in his favour.
On 22 July 2016, the Applicant filed an Application in a Case seeking certain orders in relation to the sale of one of the parties’ properties and the payment of the mortgage in respect of the other property. The Respondent consented to a number of the orders which were sought in that Application in a Case on 15 August 2016, including an order for the sale of the property as sought by the Applicant and that she be liable for the mortgage repayments on the other property.
On 21 October 2016, the Applicant filed an Amended Initiating Application seeking an 85/15 split in his favour.
On 2 November 2016, the Respondent filed an Amended Response seeking fifty percent of the equity of the two properties. At the final hearing on 23 November 2016, it was conceded on behalf of the Respondent that her entitlement was less than fifty percent of the pool.
At the commencement of the final hearing, the Applicant altered his position in relation to the payment of a liability which the respondent had with the Office of State Revenue arising out of one of the properties which was purchased during the parties’ relationship. Ultimately, the Applicant conceded that the liability ought to be paid from the proceeds of sale of the property listed for sale after the orders of 15 August 2016. The liability was approximately $35,000 and it had previously been the Applicant’s case that the liability should be borne by the Respondent.
Whether a party has been wholly unsuccessful: s.117(2A)(e)
Judge Harman in Reilly & Reilly (No.2)[17] noted in respect of this sub-s117(2) that “In that context, wholly unsuccessful means there was no justified basis for the position adopted, having regard to the outcome of the proceedings.”
[17] [2016] FCCA 1706 at [125]
The Respondent has not been wholly unsuccessful. An order adjusting the parties’ property interests was made pursuant to s79 of the Act. The Respondent has received the benefit of an order in her favour, albeit not the order she sought.
Offers made & any other matters: s.117(2A)(f) & (g)
Section 117(2A)(f) is concerned with written offers.
On 8 July 2016, the Applicant made a written offer of settlement. That offer, had it been accepted by the wife, would have resulted in a more favourable result for her and a less favourable result for the Applicant.
It is submitted on behalf of the Respondent that the Applicant’s non-acceptance of the offer ultimately resulted in the Applicant being in a far better financial position, including after taking into consideration his costs incurred. It was submitted that this was “due solely to the wife’s failure to accept the open offer.” This is an interesting submission to be making.
The submission made on behalf of the Respondent fails to take into consideration the fact that the Applicant’s Initiating Application was also more generous to the Respondent that the final orders, it does not take into consideration that the Amended Initiating Application upon which the Applicant was ultimately successful was filed on 21 October 2016, and it does not take into consideration that the reason why the Applicant is in a ‘far better financial position’ is because he pressed on with his Amended Initiating Application and prepared his case accordingly.
The submission is also misconceived.
An offer of settlement is by its very nature a compromise position. The person who makes the offer and ultimately is successful, is nearly always in a better position than he/she would have been had the offer been accepted. That is the very reason why offers of settlement are taken into consideration in costs applications, and why the various rules of different courts provide for the making of offers of compromise and provide for specific costs consequences if they are not made.
In Davida & Davida (Costs)[18] the Full Court said:
The other justifying circumstance is the husband’s relative success. True it is that the relevant paragraph in section 117(2A) refers to a party being “wholly unsuccessful”, but I think it is fair to say that the practice has been to look at what one might term the relative merits of success or lack of success between the parties, even if necessary doing that under the last matter mentioned in section 117(2A), being any “other” matter.
[18] [2011] FamCAFC 61
The Applicant was largely, albeit not wholly, successful in his application for final orders. He made some concessions at the commencement of the final hearing which could have been made earlier[19].
[19] Even taking into consideration that full disclosure of the amount of the Respondent’s debt to the Office of State Revenue was made late in the piece.
However, the Applicant’s relative success in the proceedings and the offer which was made months before he filed his Amended Initiating Application are both matters which the Court give significant weight to.
Costs Ordered
As a result of the consideration of the above matters and the findings which have been made, the Court finds that the circumstances of this case justify the Court making an order as to costs, as required by sub-section 117(2).
The questions remaining are quantum and whether costs are warranted on an indemnity basis.
Indemnity Costs
There is nothing in the Family LawAct which inhibits the making of an order for indemnity costs.[20] However, an order for costs itself is a great departure from the normal standard.[21]
[20] See Prantage & Prantage (2013) FLC 93-544
[21] See Kohan & Kohan (1993) FLC 92-340.
The passage of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[22] stating the position with regards to indemnity costs is well known and those principles are of course, applicable to matters decided under the Family Law Act[23], and have been applied by this Court, the Family Court and the Full Court of the Family Court in appropriate instances.
[22] (1993) 46 FCR 225
[23] Eg. Munday & Bowman (1997) FLC 92-784
Nothing which the Applicant submitted persuades the Court that an order for indemnity costs is appropriate in all of the circumstances of this case.
Quantum
It is appropriate that an order for costs be only for costs incurred after the making of the offer of settlement on 8 July 2017.
In exercising the wide discretion the Court has in respect of what costs order, if any, it will make, the Court is mindful of the scale in Schedule 1 of the Rules which provides for event-based costings. The Court is satisfied the Schedule is appropriate in respect of an assessment of costs incurred.
The Court therefore makes the following costs order, by reference to Schedule 1:
a)Costs of Application in a Case as a discrete event[24]: $2,131;
b)Preparation for final hearing[25] – 1 day matter: $4,686 ;
c)Daily hearing fee solicitor[26]: $2,199 ;
d)Daily hearing fee counsel[27]: $3,298.50; and
e)The costs of this application treated as a discrete event[28]: $2,931.
[24] Item 3, including short mention hearing fee
[25] Item 6
[26] Item 13 – 1 day
[27] Item 13 and 14 – 1 day
[28] Item 3, including half day hearing fee
The total costs to be paid by the Respondent are $15,245.55 which I propose to round down to $15,000.
The Court proposes to allow a period of 90 days for the payment of costs.
Accordingly, orders are made as set out at the forefront of these Reasons.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic
Date: 18 August 2017
0
15
3