EAKINS & EAKINS
[2013] FCCA 1467
•27 September 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| EAKINS & EAKINS | [2013] FCCA 1467 |
| Catchwords: FAMILY LAW – Costs – application for costs by written submissions to Chambers – whether costs should be awarded on an indemnity basis or party/party. |
| Legislation: Family Law Act 1975, ss.117(1), 117(2), 75(2) |
| Weir & Weir [1993] FLC 92-338 Black & Kellner [1992] FLC 92-287 Re JJT & Ors; Ex Parte Victoria Legal Aid [1998] FLC 92-812 Prantage & Prantage [2013] FamCAFC 105 Colgate-Palmolive & Cussons Pty Ltd (1993) 46 FCR 225 Davida & Davida (Costs) [2011] FamCAFC 61 Browne & Green (2002) FLC 93-115 Hamlin v University of Queensland (No.3) [2013] FCCA 1129 Hitch & Hitch [2012] Fam CAFC 124 Penfold and Penfold (1980) 144 CLR I & I (No.2) (1995) FLC 92-625 |
| Applicant: | MS EAKINS |
| Respondent: | MR EAKINS |
| File Number: | PAC 2066 of 2012 |
| Judgment of: | Judge Harman |
| Hearing date: | In Chambers and on written submissions |
| Delivered at: | Parramatta |
| Delivered on: | 27 September 2013 |
ORDERS
The Husband shall within 42 days, pay to the Wife her costs as assessed in the sum of $24,891.72.
Otherwise remove all issues from the list of cases awaiting hearing.
IT IS NOTED that publication of this judgment under the pseudonym Eakins & Eakins is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 2066 of 2012
| MS EAKINS |
Applicant
And
| MR EAKINS |
Respondent
REASONS FOR JUDGMENT
The application made to the Court at this time follows upon the conclusion of substantive property adjustment proceedings between the parties.
The parties to the proceedings are the Applicant Wife, Ms Eakins and the Respondent Husband, Mr Eakins.
The property adjustment proceedings were concluded by orders made by me 21 August 2013.
A written judgment was delivered explaining my reasons with respect to the property adjustment orders made by me. It will suffice to record that the net effect of the orders made saw each party retain a parcel of real estate and required:
a)The Husband to pay the Wife a sum of $47,000; and
b)Each party to otherwise retain all property in their respective possession, custody or control.
At Order 22 (the final Order) of the orders made disposing of the property adjustment proceedings was in the following terms:
In the event that either party wishes to pursue an application for costs then:
a)The party wishing to pursue such application shall within 14 days of today’s date, file a minute of order and written submission in support of such orders;
b)The party responding to same shall, within a period of 14 days after service, file and serve written submissions in response; and
c)The Applicant pursuing an order for costs shall be entitled, within a period of 7 days of service of the responding submission, to file any written submission in reply.
The above order was made as:
a)Each party had sought in their respective Application or Response a general order for costs with respect to the proceedings;
b)The issue of costs had been raised in closing submissions of Counsel for each party and had been specifically identified as an order that would be pursued in the wife’s case in the event that she was successful in obtaining the relief she sought.
At the conclusion of the judgement delivered by me in the property adjustment proceedings I had recorded the following:
Costs
175.Each of the parties has, through their respective application and response, sought a broad and general order for costs.
176.No specific submission has been sought from the parties with respect to costs and, accordingly, whilst noting that each has purported to seek an order for costs, I have not proceeded to determine that issue. I propose to make directions for the parties to file written submissions with respect to costs should they wish to pursue such an order and judgment will be delivered, based upon such submissions as are received in accordance with the directions made by me, upon the closing of such submissions.
Consequent upon the making of the above orders and on 4 September 2013 a written minute (in the form of an Application in a Case) was filed by the Wife and seeking orders as follows:
a)In accordance with Order 21 of the Applicant Wife’s further Amended Application filed in the Federal Circuit Court on 19 July 2013 that within fourteen (14) days the Respondent Husband pay to the Applicant Wife her costs and disbursements relating to the these proceedings as and from 16 May 2012 on an indemnity basis the sum of $77,000, or in the alternative to an indemnity basis within fourteen (14) days of any agreement or assessment;
b)In the further alternative the Respondent Husband pay to the Applicant Wife her costs and disbursements in relation to these proceedings as and from 16 May 2012 at scale in the sum of $45,520.88 or in the further alternative on a party/party basis within fourteen (14) days of any agreement or assessment.
I am satisfied that:
a)The orders sought by the Wife and as evidenced by the Application in a Case was filed within 14 days of the conclusion of the proceedings;
b)Absent the order made by me requiring written submissions within 14 days the Wife would have been entitled to press an application for costs within 28 days of the conclusion of the proceedings.
c)Simultaneous with the filing of the Application in a Case the Wife has caused to be filed an Affidavit sworn by her together with lengthy, detailed written submissions.
d)The Wife’s attorneys have provided to the Court and filed an Affidavit of Service deposing to the fact that the above materials were forwarded to the Husband on the same day of filing namely 4 September 2013 same having been forwarded to him by ordinary pre-paid post to his address for service given in the proceedings.
Rule 6.12 of the Federal Circuit Court Rules2001 provides that:
A document served by post… is taken to have been served…If it was served to an address in Australia – on the day when the document would be delivered in the ordinary course of the post.
Section 29 of the Acts Interpretation Act 1901 provides:
Where an Act authorises or requires any document to be served by post, whether the expression ‘served’ or the expression “give” or “send” or any other expressed then the service is deemed to be affected by properly addressing, pre paying and posting the document and unless the contrary is proved, to be affected at the time which the letter would be delivered in the ordinary course of the post.
Section 160 of the Evidence Act1995 (Cth) provides (with respect to postal articles) as follows:
It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by pre-paid post addressed to a person at a specified address in Australia or in an external territory was received at that address on the fourth working day after having been posted.
Working day is then described in subsection 3 in the following terms:
“Working day” means a day that is not:
(a) A Saturday or Sunday; or
(b) A Public Holiday or a Bank Holiday in which the postal article was addressed.
On the basis of the above, service is presumed to have been affected on 10 September 2013.
In accordance with Order 22 of the orders made 21 August, 2013 the respondent was required to file a minute of orders sought and written submissions in the event that he sought to press any application for costs. Those materials would appear to have been filed 18 September, 2013 although they were not entered on the Court’s system or brought to my attention until 27 September, 2013.
The Respondent’s material, whilst the Respondent continues to give his address for service as his own address rather than that of an attorney, annexes written submissions prepared by his Counsel. In that regard and whilst the husband has appeared throughout the proceedings as a self represented litigant, the husband:
a)Has with the exception of one Court event (the second) been represented by Counsel throughout;
b)Has had the benefit of being competently advised and represented throughout the proceedings (notwithstanding that such attorney’s have never filed a Notice of Address for Service nor sought leave to appear without same);
c)Could not be said, at any time in the proceedings, to have been a self represented litigant;
d)Could not be suggested to have dealt with the proceedings without Counsel;
e)Gave evidence that he had incurred legal fees, largely paid, in the order of $20,000 in addressing the proceedings[1].
[1] See paragraphs 78-80 of the Primary judgement.
On the basis of the respondent’s material service is conceded as having occurred 5 September, 2013 and thus the respondent’s submissions have been filed within 14 days on either calculation.
I am satisfied that due process has been afforded to both parties in that they have each filed and served served material and thus each would be fully aware of:
a)The orders sought by the other;
b)The evidence relied upon by the other; and
c)The submissions made by the Applicant in support of the application and including specific reference to legislative provisions relied upon and prior case law and authority.
In light of the above matters I am satisfied that the application can be properly heard and determined by me in chambers and based on the submissions that I have received same having been filed as directed.
Orders Sought
The orders sought by the Applicant are related above in full.
The Applicant seeks orders on an indemnity basis and so as to require a payment by the Respondent to the Applicant of the totality of her costs being $77,000.
In the alternative the Applicant seeks a payment for costs in accordance with “scale” and being a lesser sum namely $45,520.88 or in the alternative as assessed.
An order of assessment of costs would require that a Bill of Costs in assessable form be prepared by the attorneys for the Applicant and filed under Part 3.2 of Division 11 of the Legal Profession Act2004 (NSW) and Legal Profession Regulation2005. I need not concern myself further with those provisions other than to identify them and their potential application.
The bill of costs annexed to the applicant’s material is a “short form” account providing simply:
“TO OUR COSTS and disbursement acting on your behalf since 16 May, 2012 to date including the current Costs Application and our previous itemised bills to you - $77,000”
The Applicant’s submissions otherwise and to the extent that the “scale” is referred to shall be taken by me, as would appear to be consistent with Annexure ‘B’ of the Wife’s Affidavit, as being a reference to the indicative scale of costs contained within Schedule 1 of the Federal Circuit Court Rules 2001. I will return to that Schedule in due course.
The Respondent does not seek an order for costs but resists the application of the wife. Specifically the Respondent:
a)Opposes any order for costs;
b)Opposes Indemnity Costs;
c)Submits that if an order is made that it should be in accordance with Schedule 1 of the Federal Circuit Court Rules 2001.
The Submissions of each party
The Applicant’s submissions helpfully and accurately identify the relevant costs provisions of the Family Law Act1975 in sections 117(1) (2) and (2)(a) and as follows:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) 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), (4A) 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.
(2A) In considering what order (if any) should be made under subsection (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;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(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.
Section 117(1) establishes what is usually referred to as the “general rule” that each party to proceedings under the legislation should bear his or her own costs.
Section 117(2) reserves to the Court a discretion to make an order for costs when the dual test (see for discussion of same the High Court’s decision in Re JJT & Ors; Ex Parte Victoria Legal Aid [1998] FLC 92-812)[2] are met being:
a)A justifying circumstance for departure from the “general rule”;
b)An order for costs (both as to its making and its quantum) is just and equitable; and
[2] As well as Hitch & Hitch [2012] Fam CAFC 124 and Penfold and Penfold (1980) 144 CLR
Subsection 2(a) sets out a non-exhaustive list of considerations.
The Applicant submits (paragraph 4.1 of her written submissions) that four discreet factors are relied upon in establishing both a justifying circumstance and justice and equity being (by reference to section 117(2)(a)) being:
§ The financial circumstances of the parties;
§ Conduct of the parties;
§ Whether either of the parties has been wholly unsuccessful; and
§ Whether a party has made an offer in writing.
Each of the above are then addressed specifically, separately and sequentially (as well as the remaining s.117(2A) considerations not specifically relied upon by the Applicant[3]).
[3] See I and I (No. 2) (1995) FLC 92-625
The Respondent’s submissions also allude to and identify the relevant statutory provisions and authorities relating thereto.
Financial Circumstances of the Parties
The Applicant’s submission is in the following terms:
The Husband was always in a superior position than the Wife. This (sic) because of his greater income earning capacity supplemented by his regular access to overtime, the financial resource of his partner M.L. and the Wife’s ongoing commitment to support the child of the marriage X (aged 17) and the older child Y (age 21).
In addition the Husbands significantly greater superannuation entitlement placed him in a superior financial position at trial (the Wife’s superannuation totalling $114,000 and the Husbands $371,735).
With respect to the above I note that clear evidence of the financial circumstances of the parties were available to me at hearing and that evidence was addressed and assessed in some detail in the reasons for judgment given by me (see paragraphs 136 – 138 inclusive).
The husband asserts[4] that:
a)His income is in the order of $111,000 per annum compared to the wife’s of $79,352;
b)His tangible asset (his home at Property W) has equity of $105,000 as against which he has a loan approval to borrow a further $65,000 to meet his obligation to pay funds to the wife ($47,000), repay monies he has borrowed to meet legal fees ($8,000) and buy a motor vehicle and following which he will have no further capacity to borrow nor meet instalment payments if ordered to pay costs;
c)The wife’s financial position is superior in that she retains a home with equity of $510,000 (which equity is affected by the addition to the mortgage/s encumbering the home of the short fall from sale of 2 previously owned investment properties, which additional liability has been addressed in and taken account of by the primary orders).
[4] Paragraph 17-18 of his Affidavit filed 18 September, 2013 and pages 2-4 inclusive of his Counsel’s submissions.
I am not satisfied that the term “superior”, as used by either party, is an entirely accurate reflection of the findings made by me as to the disparity of income and earning potential of the parties or property and resources to be retained by them. However, I was and remain satisfied that:
a)The Husband’s income was and is greater than the Wife’s
b)The Husband’s expenses (even taking into account his assessed child support liability) for the support of himself and the children of the relationship were and are less than those of the Wife and leave him with a surplus of income over expenses.
The greater financial position of the Husband (whether it be slight or substantial) and any capacity that this may give rise to as regards the Husband’s ability to meet an order for costs, if made, is far from dispositive of the issue. However I am satisfied that the Husband, through his income, financial resources and property held by him (noting as above, the effect of the orders made by me), would have the capacity to meet an order for costs if one were considered justified and just and equitable.
Legal aid
Neither party is legally aided and the factor is not relevant.
Conduct of the parties with respect to the proceedings
The Applicant’s submission is in the following terms:
In summary the Husband’s claim for both notional add backs post separation and failure to accept the Wife’s unconditional 55% entitlement to property adjustment – offered in open Court 24 April 2013 – unduly prolonged the proceedings and made them far more expensive than they should have been or was warranted given the modest asset pool; the Husbands failure to seek a reasonable order at any stage in the proceedings until the final submissions, and the Husband’s pursuit of issues and relief that had no prospects of success having regard to his own evidence and his counsel’s submissions, comprised conduct that, on proper advice, should have alerted him to the risk of the current costs application.
I do not propose to consider, as regards the address of “conduct”, the Wife’s offers of settlement. They will be addressed separately.
The husband asserts that no criticism can be made of his conduct of the proceedings and he particularly asserts that:
a)There was, at various times, “in principle agreement” as to an equal division and that resolutions were scuttled by the wife’s withdrawal from same. There is no evidence which supports that submission;
b)That various of the wife’s offers (to which I shall turn shortly) could not be accepted as the “asset pool was in flux”. It is to be noted that at separation the parties owned 4 parcels of real estate and that 2 of the properties were sold (indeed, interim consent orders requiring their sale, were made 24 September, 2012)[5];
c)The wife’s amendment of her application prior to 24 April, 2013 (when the matter was first listed for hearing) “…was based in part on a ground not before articulated, namely the wife having to support the parties’ adult daughter, although there was no evidence in support of this claim…”. This submission I reject and find to be somewhat disingenuous. The bases of the wife’s claim for relief were not varied throughout the proceedings (ie the facts and circumstances of the case did not change although the claims and suggested grounds of relief and the specific orders each party sought may have). The wife’s claim to have the support of the adult child was abundantly supported by evidence and I so found[6];
d)“While it was articulated that the wife would amend her application to seek orders reflecting an agreement to 55% of the assets no such application articulating those orders was ever provided to the husband”. That submission is contrary to fact and the evidence of the case[7]. There was no “agreement” to 55% of the pool and, indeed, no agreement as to the pool as at 24 April, 2013 and on the basis of the husband’s agitation of notional add backs all of which were ultimately rejected. The wife orally amended her Application whilst the matter was before the Court and subsequently further amended her position with the further, amended Application filed.
e)“The other important issue on 24 April, 2013 was the changing asset pool”. That was not identified as a relevant factor when the matter was before the Court 24 April[8]. In any event:
i)An change in the value of assets during the course of litigation is far from unusual;
ii)No submission was put at trial that the assets would be dealt with other than on their present value; and,
iii)The amendment of relief sought by the husband (to propose, shortly prior to trial, a super splitting order never previously considered) created far greater mischief in negotiations;
iv)The changing value of the husband’s superannuation was, perhaps, a further motivating factor for both parties and especially, in this instance, the husband to engage in commercially realistic address of the matter and resolution of same.
[5] See paragraphs 112-117 inclusive of the primary judgement
[6] See paragraphs 123-130 inclusive of the primary judgement
[7] See transcript 24 April, 2013
[8] ibid
As regards the conduct of the proceedings it is to be noted that:
a)The proceedings were commenced by Initiating Application filed by the Wife in the Family Court of Australia. That Application was filed 16 May 2012;
b)It would appear, from the issues raised between the parties with respect to disclosure at trial, that pre action procedures had not been followed or fully complied with prior to the commencement of proceedings (pre action procedures directly applying to proceedings before the Family Court regulated, as that Court’s procedures are, by the Family Law Rules 2004. Pre action procedures are relevant to and apply in proceedings commenced in the Federal Circuit Court by operation of Regulation 1.05 of the Federal Circuit Court Rules 2001).
c)The proceedings first came before the Family Court 20 June 2012 on which date both parties appeared and were represented. What transpired on that day is unclear. However, the proceedings were adjourned to a subsequent date (21 August 2012) “for terms”.
d)The proceedings were next before the Court 21 August 2012. On that date any prior, apparent agreement would appear to have broken down. The Applicant’s legal representative appeared and Mr Eakins appeared in person. The proceedings were adjourned to this Court and listed 24 September 2012 for further orders and directions.
e) The proceedings were next before the Court 24 September 2012. On that date both parties appeared and the Respondent was represented by Counsel appearing on a direct brief. Indeed save for the appearance 21 August 2012 (the second occasion that the proceedings were before the Court and when the matter was transferred to the Federal Circuit Court for hearing) Mr Eakins has been represented by Counsel appearing on a direct brief.
f) On 24 September 2012 a number of orders interim orders were made by consent and the proceedings were listed for trial 24 April 2013. Directions were made to secure the parties’ preparation therefore.
g)When the proceedings came before the Court 24 April 2013 (the fourth Court event) both parties appeared and were represented by Counsel. The proceedings were, regrettably, not reached and were adjourned for hearing to 8 August 2013.
h)It is to be noted that on 24 April, 2013 and as evidenced by the transcript of the proceedings that day (obtained and filed by the Applicant with their written submissions) that an open offer was made, while both parties were present in Court and represented, that the Wife would compromise and resolve the proceedings forthwith on the basis of 55% division of the asset pool in her favour. I will return to that and other offers in due course.
i)The proceedings were then before the Court for the fifth Court event 8 August 2013 when the matter proceeded to hearing. Both parties were cross examined and the proceedings contained within that day and concluded by Court hours being extended.
j)The matter was before the Court for the sixth and final occasion on 21 August 2013 when reserved Judgement was delivered.
Leaving aside any issue relating to suggested non-compliance by the parties or either of them with:
a)Pre action procedures; and
b)Their obligation to give full and frank disclosure (see for example Black & Kellner [1992] FLC 92-287 and Weir & Weir [1993] FLC 92-338);
no issue is raised with respect to the Husband’s conduct in the proceedings save for:
a)His rejection or non-acceptance of offers made by the Wife (to which I shall return); and
b)His pursuit of grounds of relief which are suggested, in the Applicants submission, to have had “no prospect of success having regard to his own evidence”.
With respect to the above I am not satisfied that the Respondent’s position could be properly described as having had no prospect of success (and specifically not within the ambit and discussion of section 17A of the Federal Circuit Court Act 1999).
The Respondent had assuredly raised a number of issues which did not find favour at hearing and which, no doubt, played some role in his resolve to not accept offers of settlement as proposed by the Wife. Those issues had included:
a)The Respondent seeking a notional add back of $5,005.65 representing savings expended by the Applicant on legal fees. The respondent’s evidence during cross examination was that he had expended $20,000 in paying legal fees no portion of which was disclosed in his filed material nor suggested as appropriate for add back;
b)Expenditure by the Wife suggested by the Respondent to be a premature distribution of pre separation savings in the sum of $10,287.23 (which may or may not have included some overlap of the above contention). The wife asserted and I accepted that she had expended these funds on support for herself and the 2 children of the marriage;
c)A proposed notional add back relating to suggested further post separation expenditure by the Applicant;
d)A suggested significant initial contribution by the Respondent through having purchased, some short time prior to the relationship, a parcel of real estate in which the parties lived for some time (during which time the mortgage encumbering same was discharged or was substantially reduced) and the proceeds of sale of which property were ultimately applied towards the purchase of a further property which the wife will, under the primary orders, retain; and
e)Suggested post separation contributions by the Respondent through meeting a number of liabilities principal amongst which was the mortgage encumbering the home in which the Respondent was living.
Each of the five contentions raised by the Respondent as above were rejected by me. However, the arguments raised by the Respondent, whilst found by me to have had no sufficient merit to warrant being upheld, were contentions which could not properly be described as “having no prospect of success”.
The above is tempered, however, by closing submissions by the Husband’s Counsel which conceded a position less advantageous to the Husband than had been previously pressed and which, on the basis of such submissions, could not have allowed the Husband to succeed with the application he had sought to press before the Court. This was particularly so as:
a)The Husband’s evidence with respect to his suggested initial contribution varied between his various affidavits and to such an extent that I was not prepared to accept his evidence; and
b)It was conceded in closing submissions that an adjustment of 10% would be made in favour of the Applicant. This was tempered with some reservations and particularly as noted at paragraph 123 of the Reasons for Judgment that no order for adult child maintenance be made (and none was made) and that the structure of orders delivering the Applicant’s entitlement to her would include a superannuation splitting order (which was not ordered).
With respect to the above it is to be noted that:
a)Between the proceedings being marked “not reached” in April 2013 and the matter being heard and determined August 2013, the Wife had sought to join a plea for adult child maintenance. That application had not been before the Court at the time that the initial hearing dates were fixed nor when the matter came before the Court and was not reached. There would have been a legitimate basis for objection to the application but that objection was not raised by the Respondent.
b)Similarly, throughout the proceedings and until shortly prior to the ultimate hearing in August 2013, the Husband had not sought any order with respect to superannuation splitting. Accordingly that was, whilst not a fresh issue, a significant change to the Husband’s position.
The Wife’s Counsel urged the Court to not readily accept the submissions put by the Husband’s Counsel and which appeared to concede (subject to the above caveats) that a 10% adjustment in the wife’s favour pursuant to section 75(2) should be made. There was great cogency and merit to that submission which was accepted by me.
In summary of the above I am not satisfied that:
a)The Husband’s conduct with respect to the proceedings and particularly the Husband’s conduct with respect to the matters enumerated (for illustrative purposes) within section 117(2)(A)(c) regarding “pleadings, particulars, discovery, inspection, direction to answer questions, admission of facts”, was not such as would justify, of itself, an order for costs; or
b)That even if the Husband’s conduct were criticised, as the Applicant submitted it should be, such criticism and findings flowing therefrom would not be dispositive of the issue.
Proceedings necessitated by failure to comply with orders
This is not relevant.
Whether a party has been wholly unsuccessful
It is submitted that the Husband’s application which has, at all times, sought a significant payment to him by the Wife, has been wholly unsuccessful. Indeed it is submitted that the application was both “misconceived and absent sufficient evidentiary foundations for the Court to consider the relief sought”.
It is further submitted that the Husband was wholly unsuccessful in his primary endeavour to obtain “notional add backs” for the property pool of the parties as well as in seeking a payment to him in a quantum of not less than $112,000.
Whilst it is often difficult to gauge what success and absence thereof might mean in proceedings conducted under the Family Law Act (particularly parenting proceedings) I am satisfied that the Husband could be fairly and accurately described as having been “wholly unsuccessful”.
I note that the Husband was unsuccessful in persuading the Court that an order for superannuation splitting should be made in preference to a cash adjustment between the parties based on readily available and tangible assets.
The Applicant’s submissions concede (paragraph 5.3) that:
The Husband may claim that the orders only gave the Wife “relative success” in that she did not obtain all that she sought particularly in respect of her adult child support application.
The Respondent submits that he:
…was not successful but…that…alone does not justify a costs order. It is also submitted…that he sought that the wife’s claim pursuant to s.66L be dismissed, and it was dismissed, arguably on the grounds submitted by the husband.
The above submission has some force save the contention that there could be any “argument” that the s.66L claim failed on the basis advanced by the husband. The primary judgement makes clear[9] that the wife’s case was made out. The grounds advanced by the husband for dismissal of the application were expressly rejected. The cross examination on those areas of the wife’s case did not elicit any concession and the evidence of the adult child was not challenged.
[9] See paragraphs 125-128 inclusive
The husband’s refusal to acknowledge and consider the various factors which favoured the wife and the adjustment sought by her pursuant to s.75(2), as reflected in his proposals and the conduct of his case, was ill advised and niggardly. That a concession was then made, in closing submissions, that a 10% adjustment should be made, highlights the folly of the husband’s position throughout the proceedings.
I am satisfied, with respect to that issue, that significant reliance can be placed by me upon the authority to which I have been referred by the Applicant’s Counsel Davida & Davida (Costs) [2011] Fam CAFC 61 and the passage therefrom being:
The other justifying circumstance is the husband’s relative success. True it is that the relevant paragraph in S.117(2A) refers to a party being “wholly unsuccessful”, but I think it is fair to say that the practice has been to look what one might term the relative merits of success between the parties, even if necessary doing that under the last matter mentioned in S.117(2A), being any “other” matter”. In that context “wholly unsuccessful” means there was no justified basis for the position adopted having regard to the outcome of the proceedings. Being “wholly unsuccessful” must look not just at the outcome but the position adopted by the party as well.
I am satisfied that the Wife, as regards issues of property adjustment (being the matters which were listed for trial in both April and August 2013 and absent the late amendment by the Wife to seek to join the adult child maintenance issue), was wholly successful and the Husband wholly unsuccessful.
I am also conscious that the wife’s unchallenged evidence was that the husband had been steadfast in his refusal to communicate or discuss issues with the wife or her attorneys. That is conduct which I am satisfied obviated against a compromise of the litigation and which increased both emotional and financial cost[10].
[10] See for example paragraph 29(b) of the primary judgement
Offers of settlement
The most significant matter relied upon by the Applicant, both as to the making of an order for costs simplicita and, in particular the making of an order for indemnity costs, is the making and rejection of offers of settlement.
I have been referred by the Applicant’s Counsel to the passage of the Full Court’s decision in Brown & Green (2002) FLC 93-115 at paragraph 57 as follows:
The insertion of s.117C in the legislation is clear indication of the desire of Parliament to enable parties to avoid unnecessary litigation by indicating to the other party an appropriate basis upon which litigation can be settled. The failure to heed a reasonable offer in the circumstances where there is adequate knowledge to the parties at the time of the offer is made to give it proper consideration, is something to which very significant weight indeed ought normally be given.
The Wife has identified in her evidence that not less than seven offers of settlement were made by her. It is clear that the first of these offers was made prior to the commencement of proceedings and on 28 March 2012.
The Wife’s evidence had been (both in her affidavit material and during her cross examination) that the Husband had been obstinate and consistent in his refusal to discuss with the Wife or her attorney’s any issue in dispute in the proceedings, respond to any correspondence or at least respond to same in a fashion that was responsive or to put or appropriately consider any offer of settlement made by the Wife.
The Wife relates seven offers of settlement that were made by her (supported by her evidence) and as follows:
a)28 March 2012 – Offer of settlement that required a payment to the Husband of $42,900;
b)4 September 2012 – Offer of settlement that required payment to the husband of $84,300;
c)22 March 2013 – Offer of settlement that required a payment to the husband of $72,000;
d)9 April 2013 – Offer of settlement that provided for no payment from either party;
e)24 April 2013 – Wife’s open offer in Court to amend her application to provide for a 55% distribution to her;
f)1 May 2013 – Offer of settlement that sought an overall distribution of 55% of the net asset pool to the Wife; and
g)19 July 2013 – Wife’s further Amended Application so as to obtain 55% of the net asset pool.
With respect to offers the husband asserts[11] as follows:
a)The offer 28 March, 2012 (being that prior to the proceedings) could not be properly considered in light of then apparent circumstances regarding investment properties. There is nothing in the husband’s evidence to suggest he responded. The husband does conceded the proposal offered a payment to him by the wife, (being, prima facie, a better outcome than the husband achieved;
b)The offer 4 September, 2012 was similarly suggested to be incapable of acceptance and for similar reasons;
c)The offer 22 March, 2013 was similarly suggested to be incapable of acceptance and for similar reasons;
d)The wife’s Amended Application filed 25 March, 2013 is suggested to:
…reflect the agreement that I thought we had come to and which was reflected in the 24 September, 2012 orders namely that Ms Eakins would keep the property at Property R, I would keep the property at Property W, the investment properties would be sold, we endeavoured to be equally responsible for outgoings for all properties pending settlement of the sale of the investment properties, and once the investment properties were sold Ms Eakins would pay me a sum of money which would reflect an equal division of our assets….
[11] See paragraphs 5-16 inclusive of the husband’s affidavit and pages 6 and 7-9 inclusive of the husband’s written submissions
Unfortunately, with respect to this submission:
a)There is no evidence or concession of agreement;
b)I have some difficulty understanding that the wife’s Amended Application was intended to do other than reflect her position (and thus was not reflective of agreement);
c)The orders made by consent 24 September, 2012 do not reflect nor corroborate any such agreement; and,
d)If the Amended Application did, in effect, reflect a concluded agreement it beggars belief that the matter continued thereafter;
e)The offer 9 April, 2013 was “…a complete surprise” to the husband as he believed there to be a concluded agreement as to an equal division. Nowhere in the evidence is there to be found anything that would support that contention. Indeed, ever Application and proposal of the wife is contrary to that position;
f)An offer was made by the husband 8 July, 2013[12]. That offer sought, inter alia, a payment by the wife to the husband of $50,000 (some $97,000 less than the eventual order);
g)That the orders proposed in the husband’s Amended Response 6 August, 2013 equated to a 55% division in the wife’s favour. The orders sought would not appear, by reference to the pool as found, to affect such a division. Further, by that Amended Response the husband, for the first time, proposed a superannuation splitting order;
h)By letter 23 July, 2013 the husband made a further offer to settle on the basis of his receiving from the wife a payment of $90,000 and the wife receiving a $100,000 super split. That proposal is suggested to represent 58% of the pool. The offer was significantly at variance, (both as to quantum and structure), to the orders eventually made.
[12] Annexure A to the husband’s affidavit filed 18 September, 2013
I accept that:
a)The husband failed to respond to a number of the wife’s offers;
b)There was no rational or reasonable basis for the husband to fail or refuse to respond to those offers (even if only to identify the bases on which he alleged the offers were, at that time, incapable of answer and the issues in dispute);
c)The husband made at least 2 offers of settlement albeit late in the day (both in July, 2013 and when the proceedings had then been on foot for in excess of 12 months);
d)The orders sought by the husband, to the extent that they sought add backs (especially as regards payment of legal fees by the wife from pre cohabitation savings and which fees were less than those paid by the husband in the same period), and a significant adjustment for initial contribution, were ill conceived and created impediments to settlement and conclusion of the proceedings;
e)The husband’s offers were significantly at odds with the orders eventually made and, to the extent that the husband based his position on the arguments rejected by me at hearing, ill conceived.
Clearly, the orders that the Wife has obtained (which require a payment by the Husband to the Wife of some $47,000) are superior to any offer that she had put to the Husband. That is so even when account is taken of the increase in the husband’s superannuation entitlements during the course of the proceedings.
The percentage basis of the division of the available pool of property on a 60/40% basis (in favour of the Wife) exceeds the offers that the Wife had put.
There is great force in the submissions of the Applicant and which submissions I accept that:
a)In each of the offers made by the Wife the Husband would have received a property settlement that was more advantageous to him than he ultimately obtained at hearing;
b)The Husband made no reasonable offer to resolve or compromise any part of the proceedings and has offered no evidence to suggest that it is so;
c)The Husband, who whilst his address for service has been his personal address throughout the proceedings, has retained Counsel and received advice from Counsel throughout (consistent with his evidence as referred to in the reasons for judgment delivered by me).
d)The husband should have been aware that he was at a risk of costs.
e)As described in the Applicant’s submissions:
His belligerence continued unabated throughout the course of the trial with not a single meaningful concession made by him whether as to contributions, the need to provide for the support of the child and adult child.
It is submitted (paragraph 6.12) that a failure to order indemnity costs “…will make a mockery of the Rules mandating the making of offers of settlement to encourage compromise”.
It is to be noted that such rules exist within the Family Law Rules 2004 but are absent the Federal Circuit Court Rules 2001. However, that is not to suggest either criticism of the Family Law Rules2004 (which criticism is not made) or the practice of encouraging offers of compromise.
Finally, it is noted with respect to offers of settlement, that:
…the Husband had the benefit of obtaining experienced advice as to whether to engage in the trial processes and to continue in those processes. The Husband’s behaviour in all of the circumstances in not accepting the offers or making a reasonable counter offer can only be inferred to be and should be found to be unreasonable.
I am satisfied that this submission can and should be accepted. As I have already indicated, the husband could not be genuinely considered to have been a self-represented litigant throughout the proceedings. He has had advice available and has received advice and representation at each stage of the proceedings.
Even if the husband had been self represented in a real and genuine sense there would still be real force to the applicant’s submission. For a party to adopt an ill informed and misconceived position, whether with or without legal advice, and which then impedes settlement and unnecessarily inflates cost would and appropriately result in the Court’s discretion to award costs being enlivened. Some mitigating circumstance might arise (such as an inability to afford or practically obtain advice). However, in this case, I am satisfied that I can proceed on the basis that even though the husband did not at any time retain attorneys on the record he clearly retained and had the benefit of advice from attorneys.
Ultimately the husband submits:
The Husband’s case was articulated seeking 50% but on the basis of an initial contribution, post separation contributions, modest addbacks and retaining a future asset submitting that these would arguably counter balance any of the wife’s s.75(2) factors.
The husband’s argument with respect to initial contribution, post separation contributions, modest addbacks were rejected and were ill advised bases upon which to pursue the position he advanced.
The husband’s closing submission conceded a 10% adjustment “with caveats’ but even with those caveats or in the event they were not accepted, still proposed an adjustment to the wife pursuant to s.75(2). Thus the conduct and closing of the husband’s case is at odds with that submitted by him.
Having regard to all of the above and, in particular, to the authorities to which I have been referred I am satisfied that a justifying circumstance exists for a departure from the general rule that each party should pay their own costs. Whether those reasons are also the basis for departing from usual practice and ordering indemnity costs is a separate issue.
Further, I am satisfied that:
a)It is just and equitable that an order for costs be made; and
b)There would be an absence of justice and equity if an order for costs were not made.
The Wife has obtained the benefit of orders from the Court substantially in excess of offers of settlement that have been made by her prior to the commencement of the proceedings and during the proceedings including on the day when the proceedings were marked as ‘not reached’ and adjourned.
On the above basis I am satisfied that costs for the entirety of the proceedings are justified and just and equitable and should be awarded.
That leaves then the question of quantum and, in particular, whether costs should be ordered on an indemnity or party/party basis and, if ordered on a party/party basis, whether same should be fixed by the Court quantifying those costs, including through reference to Schedule 1 of the Federal Circuit Court Rules 2001, or left for assessment by a State Tribunal.
Indemnity Costs
Paragraph 8 of the submissions made by the Applicant canvases a number of authorities and general principles established thereby regarding indemnity costs.
The Applicant’s submissions have not referred to or included reference to the statements of the Full Court in Prantage & Prantage [2013] FamCAFC 105 and in particular that set out in paragraphs 76 – 86 thereof which I incorporate herein.
The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised.
This Court recognised in Kohan (supra) that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said, at 79,605:
it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:
When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.
At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”. We consider citation of authority to this effect would be otiose, so well accepted is the proposition.
We know of one attempt in another jurisdiction to move away from the “usual rule” that costs are awarded on a party and party basis. In Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579, Einfeld J gave reasons why the “usual rule” should no longer apply in the Federal Court of Australia.
The views expressed by Einfeld J were the subject of prompt criticism by the Full Court of the Federal Court in Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151, where Black CJ said at 153:
Recently, in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128, Einfeld J expressed the view that it was wrong to begin any consideration of costs by reference to a usual rule. Rather, he considered, the question of costs should be determined on its merits without any usual rule or preconception as to the costs issue (see at 133). Other judges, however, have continued to follow the established approach (see, for example, MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236) and it was recently applied by a Full Court in McHattan v Saramoa Charters Pty Ltd (unreported, Federal Court, Full Court, 17 September 1996). Moreover, one of the difficulties with any different approach is that O 62 of the Federal Court Rules 1979 (Cth), the costs order, proceeds on the footing that in the ordinary case costs will be ordered on a party and party basis. This is now reinforced by the provisions of O 23, r 11(4). Order 23 provides for the making of offers of compromise and, in specified circumstances, r 11(4) provides for a presumptive entitlement to costs on a party and party basis up to and including the day an offer was made and for indemnity costs after that day. Another difficulty with any departure from the established approach, an approach described by Sheppard J in Colgate-Palmolive (at 233) as “entrenched”, is the uncertainty that a different approach would involve.
It may be that on some future occasion a Full Court will nevertheless be asked to reconsider the basis upon which indemnity costs orders in this Court should be made, but no such invitation was extended in this case and the present application for indemnity costs should be considered in accordance with the well established principles discussed by Sheppard J in Colgate-Palmolive and summarised by Hill J in John S Hayes.
Cooper and Merkel JJ went further in their joint judgment in Re Wilcox. They said at 156-157:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
The recent decision of Einfeld J in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 has cast doubt on these principles. In Marks, after discussing s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA) and a number of policy considerations in relation to costs, Einfeld J concluded (at 133):
“The matter of the interaction of ‘the usual rule’, particularly as affects indemnity costs, with the statutory regime of the Federal Court Act is one which in my most respectful opinion requires fresh attention. An interpretation which I believe to be more in keeping with such a statutory provision is that the court is to start with no ‘usual rule’ or preconceptions as to the costs issue. Rather, the question of costs, like other aspects of the case, will fall to be determined on its merits. This means that the applicant for indemnity costs must put forward all of the circumstances which suggest that the most [r]igorous order should be made.”
In the light of that conclusion it is desirable that we set out our views on the manner in which the court's jurisdiction to award indemnity costs ought to be exercised.
Until Marks the principles enunciated in Colgate-Palmolive and generally applied in the Court were:
1. Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2. In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c) whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
Cooper and Merkel JJ went on to consider relevant provisions of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 1979. Having done so, their Honours said, at 158:
As was pointed out by Sheppard J in Colgate-Palmolive, the costs for which these rules provide are costs on a party and party basis. The rules do not deal with the award of costs on any other basis. Although the gap between actual costs and the scale rate used in determining party and party costs may be increasing, it is relevant to note that the criterion in r 19 in respect of the items for which costs may be recovered allows recovery of all such costs, charges and expenses as appear to the taxing officer:
“to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party … ”
…
The rules apply unless otherwise ordered. The very fact and terms of the relevant rules suggest to us that, unless the justice of the particular case requires or some special or unusual feature arises, the rules should not be departed from by the making of some other order for costs in exercise of the jurisdiction conferred under s 43 [of the Federal Court Act]. The generality of the criteria for departing from the usual rule ensures that the discretion to depart from the rule can be exercised whenever the Court is of the view that after applying the criteria to the facts of the particular case, it is just to do so. Such an approach is consistent with the requirement that the discretion to award costs is to be exercised judicially.
However, there are other reasons for continuing to apply the principles that have been generally applied in the Court.
As was also pointed out by Sheppard J in Colgate-Palmolive, for the reasons discussed by him, the ordinary rule in favour of party and party costs, has been settled practice in the courts in England and Australia over a very long period of time. It is not readily apparent why that practice should be changed. It may well be that the scale rates, rather than the principles, require review.
Further, a general discretion of the kind suggested by Einfeld J is likely to give rise to greater disputation over costs than already exists, with possible inconsistency within the Court and between courts. Such outcomes do not advance and are not in the interests of the administration of justice.
The combination of these factors leads us to the view that the principles enunciated in Colgate-Palmolive as stated above ought to continue to be applied in the Court.
Our research shows that the Federal Court has continued to apply the “usual rule” that costs are payable on a party/party basis. See Boyapati v Rockefeller Management Corporation (No 2) [2008] FCA 1375, at [29] to [31], where Kenny J referred to the many cases where the rule has been applied in the Federal Court. We observe also that the rule was applied (and Re Wilcox was cited with approval) by this Court in Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225 at [13] per Boland, Thackray and O’Ryan JJ.
The same rule is applied in the Supreme Courts of:
New South Wales (see Michos v Council of the City of Botany Bay (No 3) [2012] NSWSC 1465 at [7]);
Victoria (see State of Victoria v Grawin Pty Ltd [2012] VSC 157 at [24]);
Queensland (see Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc (t/as East Coast Apprenticeships) v Group Training Assoc Qld and Northern Territory Inc [2013] QSC 87 at [16]);
South Australia (see Kenneally v Pouras & Ors [2007] SASC 303 at [13]);
Tasmania (see Hayward v Forest Practices Tribunal (No 3) [2004] TASSC 14 at [6]); and
Western Australia, where in Re Malley SM; Ex parte Gardner [2001] WASCA 83, a bench of five Judges held that a special costs order (another description for an indemnity costs order) will only be made in exceptional circumstances.
It will accordingly be seen that if the trial Judge purported to depart from the “usual rule”, he would not only have declined to follow settled authority in this Court, but also authority applied in all other superior courts in Australia.
The Respondent does refer to and adopt Prantage.
The various authorities to which I have been referred by the Applicant’s counsel identify non-exhaustive but specific categories that are illustrative of circumstances which would warrant an order for indemnity costs and which highlight that;
a)The discretion to award indemnity costs should be based upon “particular facts and circumstances of the case in question”; and
b)The awarding of indemnity costs, as particularly emphasised by the Full Court in Prantage, represents a “departure from the normal standards”.
As was pointed out by Sheppard J in Colgate-Palmolive & Cussons Pty Ltd (1993) 46 FCR 225 an order for indemnity costs might be made when it is seen as “…necessary or proper for the obtainment of justice or for maintaining or defending the rights of a party”.
In the Wife’s case it is suggested that she will be disadvantaged if the totality of her costs are not ordered to be paid in that she will then be deprived of the benefit of a portion of property to which she is otherwise entitled, as the fruits of her litigation, and pursuant to the orders made by me. However, I am satisfied that such a circumstance arises in each case determined by the Court and would not warrant, by and of itself, a departure from the “normal standard”.
The husband submits, in reliance upon Kohan[13] (cited with approval in Prantage) that:
“…a party who enters into a costs agreement should[14] be warned and must anticipate in this jurisdiction that each party might well have or bear his or her own costs, and that even if an order for party party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order” and,
“the wife….(i)t must have been apparent to her….that a rate of costs which amounted to three times the scale[15], exposed the wife to great risks. If she was willing to assume those risks, it does not seem just to saddle the husband with them”.
[13] At 79,615
[14] Indeed, the Family Law Rules 2004 and Legal Practitioners Act 2004 require it
[15] Which is reflected in the costs agreements entered into by the wife in this case
The husband’s submissions also adopted the comments of Murphy J in Prantage[16](quoting Kohan at 79,605):
“The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis”
[16] At paragraph 154
As the Full Court observed in the concluding paragraph of the above passage from Prantage, to depart from the “usual rule” might represent a failure to follow settled authority both in the Full Court of the Family Court and all other superior Courts in Australia. That is not to suggest that the discussion of principle by the Full Court in Prantage is in any way inconsistent with the authorities to which I have been referred by Counsel for the Applicant (many of which are incorporated within the passage above).
I am not satisfied that for justice to be obtained by the Applicant that an order for indemnity costs is warranted. This is particularly so in light of:
a)The findings of fact which I have made above;
b)The overall financial circumstances of the parties and the lack of substantial, significant variance between those of the parties;
c)The impact that an order for indemnity costs and the quantum sought would have upon the Respondent. In this regard it is to be noted that the Applicant’s submissions in opposition to a superannuation splitting order, found favour with me. As a consequence the Husband, whilst he has received 40% of the overall property pool of the parties, has received the majority of that entitlement by retaining superannuation entitlements.
On the basis of my findings as to the composition of the asset pool (paragraph 77 of the primary judgment) the Husband has retained a parcel of real estate with a value of $360,000 and encumbered by a mortgage of $254,000 (leaving in equity $106,000). From this property the Husband is obliged to pay to the Wife, pursuant to the orders made by me, a sum of $47,000 thus leaving him with equity available in the property of $59,000 (or approximately 16% of the total value of the property).
I am concerned the Husband would have significant difficulty in borrowing further funds secured against the property. Further, if the Husband were required to sell the property to meet an order for costs (and the fact that he might be compelled to do so does not, in my mind, obviate against the justice and equity of the order being made) he will incur sales costs (such as agents commission and legal fees) which will further erode the funds which would be available to him.
The Husband does not otherwise receive, as a consequence of the orders that I have made, any significant tangible asset and noting that he will otherwise retain:
a)Motor vehicles and a trailer with a total net value of $10,000;
b)Items of furniture and contents valuing $1,000; and
c)Shares valuing $1,024
In addition to the above the Husband will retain his superannuation entitlements with the total value, as already indicated, of $371,735. However, the Husband is presently 49 years of age and as far as can be ascertained from my reasons for judgment 21 August 2013, the Husband will not be entitled, absent total and permanent disability or redundancy, to access those funds until minimum retirement age whether that is 55 or 60 or some other age. Thus the Husband is still some years away from having ready capacity to access those funds and cannot, in all probability, use them as a basis of borrowings.
A further significant concern I have with the type and quantum of costs I am asked to impose upon the husband, is that the husband has had no say in or control over the costs incurred or negotiation of the terms of retainer of the applicant’s attorneys[17].
[17] See paragraphs 93 and 94 above
It is, of course, a matter for the Applicant to instruct attorneys and Counsel of her choice and to pay them such fees as she may negotiate with them.
The basis of the fees charged by the Applicant’s counsel and attorneys is clearly disclosed in the Applicant’s material which includes a copy of the costs agreement between her and her attorneys.
The costs which have been incurred and charged are significant. The costs represent 11.5% of the property the wife received under the orders made.
The proceedings were far from complex. They should have been easily resolved. If not resolved they should have been easily prepared for hearing and without significant work required to diligently ensure address of both duty to the client and the Court.
I am conscious of community perceptions regarding legal fees. The costs charged would appear to be entirely out of step with such perceptions.
It is no wonder, with such fees charged for a straight forward application to the Court and it’s relatively expeditious determination, that community concern and outrage is expressed regarding the cost of legal advice and representation and the contribution of such costs and their apprehension nay fear to a reduction in available access to justice for the public. Such matters, no doubt, are connected with and perhaps emblematic of the increasing level of self represented litigants (in a real and genuine sense as opposed to the position of the husband in this case) in matters before this and other Courts.
The practice of law is focused upon duty and service. It is a profession of honour and ethics. It involves study, commitment, sacrifice and hard work. It is also the means by which those would practice law derive their income.
I do not for one moment begrudge attorneys due reward for their efforts. I also acknowledge the significant stresses and strains upon those in practice and especially the increasing financial strains and demands arising from the conduct of practice. Significant professional indemnity insurance premiums, rent, CLE commitments to name but a few are now significant financial burdens.
The Court acknowledges the great benefit to parties (as well as to the administration of justice and effective conduct and disposal of litigation in busy list) of competent legal representation.
The wife’s attorneys and Counsel have provided excellent service to the wife. Her case has been prepared to a high that, regrettably, is not uniform. The conduct of her case has been in accordance with the highest standards and traditions of the bar.
Lawyers and especially highly competent lawyers have skills of value and which are in high demand. However, such skills and experience, one would think, would reduce the time taken to perform tasks and by reference to the hourly and daily rates disclosed it would seem a vast quantity of work must have been performed in dealing with a straight forward and uncomplicated case.
It is regrettable that the costs the wife has incurred would be beyond the reach of the vast majority of litigants or, if funded, would be financially ruinous to them.
The wife is not a woman of great means. Following the hearing, the wife will retain a modest home with a modest mortgage and which will house her and the 2 children of the relationship. She has modest superannuation which will clearly be inadequate to meet her needs once she is unable to work. She earns a modest income[18].
[18] The wife’s income is $1,526 gross per week whereas, by reference to the 2011 census, the median income for Greater Sydney area households is $1,447 gross per week.
The wife will receive a cash payment from the husband of $47,000 as a consequence of the orders made. Her legal costs are $77,000. Thus she will need to find an additional $30,000 to pay her lawyers.
The costs which the wife has been charged, with her consent and in accordance with the costs agreements that she has entered into, are more than 3 times the scale that Schedule 1 of the Federal Circuit Court Rules 2001 would suggest (though they are not prescriptive or regulatory rules). The amount allowed by the rules, objectively, would appear generous.
The Costs Agreement between the applicant and her solicitors stipulates an hourly charge rate of $330 plus GST (thus $363 per hour).
The Costs Agreement between the applicant and her Counsel stipulates an hourly charge rate of $700 plus GST (thus $700 per hour) and $6,000 per day.
Within the solicitor’s costs agreement an estimate of total costs is given as range of between “$20,000 to 60,000”. The costs agreement also indicates “We do not provide quotations. However, you can request an Estimate from us at any time”[19]
[19] With respect to same see Part 3.2.3 Legal Profession Act 2004
Counsel’s costs agreement does not give an estimate but does state (paragraph 1.7):
Should a firm lump sum quote of my fees for a particular matter be required then a written request should be made for a firm quote of the total costs excluding GST[20].
[20] ibid
No request for same nor provision of same is in evidence.
Curiously, the solicitor’s costs agreement contains a section (Part 10) dealing with “Costs in Court Proceedings” and which provides:
If Court proceedings are taken on your behalf, the court may order the other party to pay your costs of the proceedings. This sum will not necessarily cover the whole of your legal costs due to us….
If you are successful in the litigation the following is the range of costs that may be recovered from the other party. The sums given are merely estimates.
Prior to hearing $200 to 1,000
Up to and including a single day’s hearing $1,000 to 2,000
Up to and including three day’s hearing $2,000 to 5,000
In cases involving property settlement where one person has refused a reasonable offer of settlement it is not unusual for the Court to make a costs order against that person.
The most common costs order made by the Family Court and Federal Magistrates Court are for small amounts in the range $200-$300. Costs orders in the range of $200-$%,000 are less common. Costs orders for more than $5,000 are rare…
It is very rare for a Court to make a costs order that requires one party to pay all of the other party’s legal costs….
There are a number of manifest inaccuracies in the above[21]. However, it makes clear the realistic expectation that has been created for the wife as regards recovery of her costs by order in pursuing her claim.
[21] Not the least of which is the “commentary” as to the Court’s “usual practice” in considering and “usual quantum” when ordering costs.
On the basis of the costs agreements and costs disclosure the wife has, in effect, written a blank cheque to her attorneys. I am asked to have the husband meet that cheque on presentation. I am not prepared to do so nor do I consider it justified, just or equitable in the circumstances considered above.
Having regard to the above facts and circumstances and as indicated I am not satisfied that the Applicant has made out a case for indemnity costs.
With respect to party/party costs I am satisfied that an order can and should be made. I accordingly turn to Schedule 1 and the Applicant’s assessment of costs in accordance therewith.
Schedule 1 of the Federal Circuit Court Rules2001
The Schedule is an indicative scale of fees and is not binding upon the Court. However, I am concerned that the Schedule is intended to provide clear notice to parties engaged in proceedings before the Court as to the likely costs which would be ordered in circumstances justifying same.
The schedule provides as follows:
Item Description Amount for a family law proceeding (including GST) Amount for a general federal law proceeding (including GST) 1 Initiating or opposing an application up to the completion of the first court date Both:
(a) $1,994.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearingBoth:
(a) $2,663.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearing2 Initiating or opposing an application which includes interim orders (other than procedural orders) up to the completion of the first court date Both:
(a) $2,494.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearingBoth:
(a) $3,332.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearing3 Interim or summary hearing—as a discrete event
Note: This stage applies to an interim application or a summary proceeding of a type not otherwise addressed in this fee structure. It does not include the item 1 or 2 component.Both:
(a) $1,661.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearingBoth:
(a) $1,661.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearing4 Up to and including the conciliation conference $1,661.00 Not applicable 5 Dispute resolution litigation intervention $1,661.00 $2,793.00 6 Preparation for final hearing—one day matter $4,250.00 $5,988.00 7 Preparation for final hearing—2 day matter $5,270.00 $8,998.00 8 Preparation for final hearing—each additional hearing day after the second hearing day $1,128.00 $1,893.00 9 Final hearing costs for attendance of solicitor at hearing to take judgement and explain orders Both:
(a) $271.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearingBoth:
(a) $271.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearing10 Application for family law location, recovery or enforcement of an order (other than an application for enforcement by a Registrar under item 11) Both:
(a) $844.00; and
(b) the daily hearing fee mentioned in item 13 that applies to the hearingNot applicable 11 Application for enforcement by a Registrar of:
(a) a warrant under rule 25B.22; or
(b) a third party debt notice under rule 25B.40$558.00 Not applicable 12 Advocacy loading 50% of the daily hearing fee mentioned in item 13 that applies to the hearing 50% of the daily hearing fee mentioned in item 13 that applies to the hearing 13 Daily hearing fee Either:
(a) for a short mention—$271.00; or
(b) for a half day hearing—$997.00; or
(c) for a full day hearing—$1,994.00Either:
(a) for a short mention—$271.00; or
(b) for a half day hearing—$997.00; or
(c) for a full day hearing—$1,994.0014 Disbursements—Court fees and other fees and payments to the extent that they have been reasonably incurred The amount of the fees and payments The amount of the fees and payments 15 Disbursements—photocopying for each page $0.69 $0.69 16 Agents fees and travelling costs
Note: For 2 or more hours travel
$561.00 $561.00
The Schedule prepared and submitted in evidence by the Applicant provides as follows:
1.
16-5-2012
Initiating Application
Daily Hearing fee$1,994
2.
20-6-2012
Case Assessment Conference
$1,661
3.
21-8-2012
Hearing Directions
Negotiations half day hearing fee
$1,661
$997
4.
24-9-2012
Hearing Duty List
Negotiations half day hearing fee
$1,661
$997
5.
24-4-2013
Preparation for final hearing on 24.4.2013 Day not reached
Counsel’s fees$4,250
$5,500
6
8-8-2013
Preparation for final hearing
Counsel’s fee
$4,250
$10,450
7.
21-8-2013
Solicitor to take judgment
Hearing fee
$271
$271
8.
4-9-2013
Preparation for Costs Application
Counsel submissions
Solicitor preparation
$4,900
$1,994
Disbursements
Court fees
Other fees
And photocopying$4,197.88
25-3-2013
Hearing fee
Paid directly by client$466
TOTAL
$45,520.88
With respect to the fees that are charged in the schedule as prepared by the Applicant I am concerned that a number of matters are beyond that which it would be appropriate for me to order.
Whilst the proceedings were commenced in the Family Court it is clear that the subject matter of the proceedings and the likely complexity and required length of hearing of same would have dictated the commencement of the proceedings in the Federal Circuit Court of Australia.
It may be that the proceedings were commenced in the Family Court with a view to avoiding cost (the Federal Circuit Court Rules 2001 require that an affidavit in compliance therewith be filed at the commencement of proceedings whereas the Family Law Rules 2004 do not). However, I propose to assess all costs and quantify same:
a)In accordance with the Federal Circuit Court Rules 2001;
b)By reference to Schedule 1; and
c)To avoid and obviate against further cost and litigation between the parties through cost assessment processes.
The above is not intended to suggest that cost assessment processes are in any way inflating of costs or cumbersome or inappropriate. Indeed they are an entirely appropriate mechanism to deal with and determine cost disputes between parties and cost disputes should be determined by such mechanisms rather than through internal taxation processes by the Court.
The difficulties that I apprehend with respect to costs as sought by the Applicant particularly relate to the matters set out below.
Counsel’s fees are claimed as disbursements. I am not satisfied, consistent with the reasons of Judge Jarrett in Hamlin v University of Queensland (No.3) [2013] FCCA 1129 that Counsel’s fees should be treated as disbursements but should rather be treated as professional costs calculated in accordance with Schedule 1.
Schedule 1 allows and permits an advocacy loading and, to that extent (and to the extent that it is considered necessary) I am entirely satisfied that the retention of Counsel at hearing was appropriate and would be certified as such.
Further to the above, to allow Counsel’s fees as a disbursement is not reflective of the equivalency of such fees with solicitor’s fees both dealt with by Part 3.2.3 of the Legal Profession Act 2004.
With respect to the above I am satisfied and adopt the reasons given by his Honour particularly at paragraphs 6 – 9 inclusive which I incorporate herewith and set out below.
The respondent submits that Counsel’s fees are properly characterised as a disbursement. No authority is cited for that proposition. The proposition is inconsistent with the approach taken by this Court to the proper construction of its Rules. In Colan Products Pty Ltd v Luxon Pty Ltd (No.2) [2002] FMCA 90 Raphael FM (as his Honour then was) discussed the event based system for costs found in the then Federal Magistrates Court Rules 2001. His Honour said:
“7. The event based system for costs found in the Federal Magistrates Court Rules is an attempt to simplify the assessment of costs and to avoid the necessity for either the state-based consideration by costs assessors or the Federal Court taxation approach. Unfortunately, like all well-intentioned ideas it is hostage to misunderstandings and the purpose of this judgment is to attempt to correct those for the benefit not only of these parties but for the benefit of others who come in the future.
…
13. … In respect of the advocacy loading I would explain this as follows. Where it has been certified that the matter is fit for an advocate under Part 20.15 this means that the advocate is entitled to 150% of the daily hearing fee. In addition, the instructing solicitor is entitled to the daily hearing fee. The only exception is when the advocate and the instructing solicitor both come from the same firm. In those circumstances (as set out in the Rules) only one fee of 150% of the daily hearing fee is payable. In this case counsel is therefore entitled to the advocacy loading on the daily hearing fee making the total payable to him of $1,027.50. This is all that counsel is entitled to. The applicant is not entitled to submit counsel’s fee note as a disbursement.
His Honour’s judgment has been followed on a number of occasions since: Rentoul v Poynton (No.2) [2008] FMCAfam 295 at [36]; Kavanagh v Madgwick (No.3) [2008] FMCAfam 287 at [42]; Bunnag v Minister for Immigration & Citizenship (No.2) [2008] FMCA 430 at [11]; Lee v Proctor & Gamble Australia Pty Ltd (No.2) [2012] FMCA 1075 at [39].
Unless I am satisfied that a previous decision of another Judge of this Court is clearly wrong, I should follow that decision. I am not satisfied that the decision in Colan (as above) is clearly wrong. I intend to follow that decision (as well as the others referred to above) and treat Counsel’s fees not as a disbursement, but by reference to the hearing fees and advocacy loading provisions in the Court’s scale of costs.
The Federal Circuit Court Rules provide:
21.14 Solicitor as advocate
(1) If a solicitor appeared for a party on a hearing alone or instructed by another solicitor who is a member of the same firm, the amount to which the party is entitled for the hearing is limited to:
(a) 150% of the daily hearing fee for 1 solicitor; and
(b) a fee for preparation.
(2) The party is not entitled to an amount for the preparation of a brief on hearing.
21.15 Advocacy certificate
The Court or a Registrar may certify that it was reasonable to employ an advocate, or more than 1 advocate, to appear for a party in a proceeding.
21.16 Counsel as advocate
If the employment of an advocate is certified as reasonable, the amount payable for counsel to appear is the daily hearing fee and advocacy loading in accordance with Parts 1 and 2 of Schedule 1.
Whilst his Honour Judge Jarrett was dealing with an application for costs in general federal proceedings I am satisfied that his Honour’s comments, erudite, concise and accurate as they are, have equal application in these proceedings.
I am concerned that the amounts claimed with respect to a number of Court events represent a significant duplication of costs and a misapprehension of the manner in which the Schedule 1 scale is intended to operate.
The proceedings having been commenced by an Initiating Application are clearly subject to stage 1 (initiating or opposing application after completion of first court date).
Thereafter the lump sum with respect to the attendance upon a Conciliation Conference (stage 3) and preparation for hearing (stage 5) are appropriate. However, it is to be noted that:
a)The stage 1 lump sum is not intended and does not apply for each and every court event arising therefrom;
b)Neither party sought interim orders at any time. Whilst interim orders were made on the first return date of the proceedings before the Federal Circuit Court (24 September 2012) those orders were made on the basis of a joint oral application by the parties and by consent;
c)Counsel’s fees are not the subject of a specific provision within the scale nor claimable as a disbursement but are subject to a loading for advocacy when considered appropriate (which in the circumstances of this case I do); and
d)Allowance for disbursements in fact incurred is entirely appropriate including, for example, the hearing fee which the Applicant was required to pay. Schedule 1 also makes clear that “Court fees and other fees and payments to the extent that they have been reasonably incurred and including photocopying” can and should be awarded.
In light of the above I am satisfied that the following can and should apply:
a)Stage 1 – initiating or opposing application up to completion of first court day - $1,994. I have allowed that which is claimed
b)Second Court event – 21 August 2012
A half day fee of $997 is claimed.
This event commenced at 11am and is recorded in the bench sheet as having been completed by the learned Registrar at 3.30pm. Accordingly I am satisfied that whilst the listing on 21 August 2012 was expressed, from the first return date and adjournment thereof, as being a listing “for terms” I am satisfied that the parties engaged in substantial negotiation and which was in the nature of, if not in fact, a Conciliation Conference.
Accordingly Stage 4 of Schedule 1 is the appropriate fee and I allow costs of this event in accordance with Stage 4 being $1,661.
c)Third Court event - 24 September 2012
This Court event is expressed to have been, and I accept was, a half day attendance and thus the daily hearing fee for a half day (Item 13(b)) should apply and therefore an allowance is made of $997.
It is sought by the Applicant to claim both this fee and an amount for “hearing duty list”. However, the matter was not listed for hearing but mention. No interim application was before the Court. No hearing occurred nor was one sought or anticipated and nor could a hearing have occurred absent such interim application.
Interim orders were made but were made by consent and on the basis of a joint oral application for such orders. That does not represent a hearing or determination of an application.
d)Fourth Court event – 24 April 2013
On this occasion the matter was listed for final hearing and was not reached. Accordingly I am satisfied that the following should apply:
i)Preparation as one day matter (item 6) $4,250
ii)Daily hearing fee $1,994 (item 13) with 50% loading for advocacy (item 12) totalling $2,991
iii)Instructing solicitor for full day hearing $1,994.
e)Fifth Court event – 8 August 2013
On this day hearing proceeded. Each of the parties had filed amended material. Accordingly with respect to same I am satisfied the following should apply:
i)Further preparation (item 8) - $1,128
ii)Counsel’s fees (as above) - $2,991
iii)Instructing solicitor (as above) - $1,994
iv)Receiving judgment 21 August 2013 – judgment was delivered in written form and comprised a brief mention. Accordingly I am satisfied that item 13(a) being a short mention should apply and allowances made of $271.
v)Application for costs and written submissions with respect thereto. I am satisfied that the most referrable amount which would apply would be stage 3 “interim or summary hearing as a discreet event” and noting that:
§Directions had been made for the filing of written submissions in the event that costs were to be pursued (having been sought in the initiating application and response respectfully); and
§No appearance has been necessary as the matter has been dealt with on the basis of submissions as received in accordance with directions made 21 August 2013.
§Accordingly I am satisfied that the allowance that should thus be made is the item 3 amount of $1,661.
Disbursements
I am satisfied that the hearing fee as paid by the Applicant should be included being $466.
Disbursements are otherwise claimed as “court fees, other fees and photocopying $4,997.88”. It is entirely unclear what this amount represents. However, The balance of Annexure ‘B’ to the Wife’s affidavit (a computer print out of disbursements) indicates a number of fees and charges generally falling within categories of:
·Title searches
·Bank fees and sundry charges
·Filing fees
·Photocopying
·Service fees
·Agents fees
·Storage fees
·Form 6 application fees (super splitting)
·Conduct money
To the extent that photocopying is claimed I am satisfied that it should be allowed at the scale rate (69 cents per page) although that rate, of itself, would appear highly inflated having regard to present practice and actual cost incurred. However, 69 cents is the amount allowed by the scale.
It is claimed that 1,414 pages of photocopying were undertaken. Whilst that is a significant amount of copying (nearly 3 reams of paper) it is apparent that significant disclosure documents were produced (indeed, a large ring binder was exchanged at the Bar Table in response to a call) and, in any event, I have no reason to doubt the accuracy of the claim.
Accordingly, I propose to allow the number of pages of photocopying enumerated within Annexure ‘B’ (being 1,414) and totalling $975.66.
Most other disbursements are properly incurred with respect to the reasonable conduct of the litigation including:
·Title searches – $61.46
·Form 6 request fees for superannuation information – $525
·Filing fee on application - $243
·Service fees (including conduct money) $447
·Transcript fee re proceedings 24 April 2013 – $241.60
I have not made any allowance with respect to:
·Sundries (whatever they may be)
·Bank fees and credit card transactions
·Agents fees for filing of documents (which can be filed by post or DX)
·Storage fees
·Facsimile fees
·Counsel fees (for the reasons discussed above).
The total of amounts allowed as above is:
Costs
Disbursements as allowed
Total
$21,932
$2,959.72
$24,891.72
Accordingly I make orders as follows:
I certify that the preceding one hundred and fifty-three (153) paragraphs are a true copy of the reasons for judgment of Judge Harman
Date: 27 September 2013
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