Eddington and Hayes
[2014] FamCA 955
•7 November 2014
FAMILY COURT OF AUSTRALIA
| EDDINGTON & HAYES | [2014] FamCA 955 |
| FAMILY LAW – COSTS APPLICATION - indemnity costs in circumstances where the court lacked jurisdiction to determine the substantive issues |
Penfold v Penfold (1980) FLC 90-800
Brown v Brown (1998) FLC 92-822
Cachia v Hanes (1994) 179 CLR 403
| Kohan v Kohan (1993) FLC 92-340 Muldoon v Carylye (2012) FLC 93-513 | |
| APPLICANT: | Mr E & Ms F (legal personal representatives for the late Mr Eddington |
| RESPONDENT: | Ms Hayes |
| FILE NUMBER: | MLC | 2949 | of | 2012 |
| DATE DELIVERED: | 7 November 2014 |
| PLACE DELIVERED: | Launceston |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | Pursuant to directions made 13 August 2014 that the Executors lodge submissions by 14 August 2014, that the Applicant file submissions by 11 September 2014 and that any submissions in reply by the Executors be filed and served no later than 18 September 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bartfeld QC |
| SOLICITOR FOR THE APPLICANT: | Glezer Lanteri & Associates |
| COUNSEL FOR THE RESPONDENT: | Dr Richard Ingleby |
| SOLICITOR FOR THE RESPONDENT: | Kenna Teasdale Lawyers |
Orders
Ms Hayes pay the legal costs and disbursements of the late Mr Eddington and the costs of the legal personal representatives of the estate of the late Mr Eddington.
Such costs to be assessed and/or determined:-
a.on an indemnity basis and are to include the costs of the substantive proceedings between the parties and of the costs application,
b.upon the earlier of the two practitioner client costs agreements, evidenced by the legal personal representatives of the estate of the deceased respondent; and
c.as agreed between the parties or in the absence of agreement to be assessed in accordance with the Family Law Rules 2004.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage senior counsel and counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Eddington & Hayes has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 2949 of 2012
| Mr E & Ms F (legal personal representatives for the late Mr Eddington |
Applicant
And
| Ms Hayes |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
Ms Hayes (‘the Applicant’) commenced property and maintenance proceedings against the late Mr Eddington (‘the Respondent’) pursuant to Part VIIIAB of the Family Law Act 1975 (Cth) (‘the Act’) seeking the exercise of the Court’s jurisdiction on the basis of a de facto relationship between them which had broken down.
Mr Eddington died in 2013 and Mr E and Ms F are the executors (‘the Executors’) of his estate and were subsequently substituted as his legal personal representatives in the proceedings pursuant to the Act. By orders made 24 May 2014 the proceedings commenced by the Applicant were dismissed and reasons were published.
In those reasons the Court determined that it lacked jurisdiction to determine those proceedings.
The orders provided that parties seeking costs could do so in accordance with the Family Law Rules 2004 (Cth).
On 17 June 2014 the Executors filed an application in a case seeking costs. That application was supported by an affidavit by the Executors filed the same day.
Senior counsel for the Executors provided submissions to the Court.[1] Attached to those submissions was the following:-
(a)Costs agreement between the Respondent and his lawyers, Glezer Lanteri and Associates Pty Ltd, relating to work on or after 15 August 2012 (‘the first costs agreement’). That costs agreement sets out the ability of the solicitors to increase the fees by no more than five per cent annually.[2] It is asserted that the agreement operates in accordance with s 3.4.26 of the Legal Profession Act 2004 (Vic). In particular clause 13 of the agreement gives effect to the acceptance.
(b)The hourly rates charged pursuant to the agreement operate between $180 per hour for a clerk to $480 per hour for Mr Gleezer. Those hourly rates are exclusive of GST. The agreement is a continuing agreement. The second agreement is somewhat odd in that it increases the charge out rate but purports to operate from the same date, viz 15 August 2012.
(c)The costs agreement from Martin Bartfield QC setting out an hourly rate of $770 per hour or a daily rate of $7,700 per day (inclusive of GST) (‘the third agreement’).
[1] Dated 13 August 2014 and filed 14 August 2014.
[2] Paragraph 3.2.
On 29 October 2014 I requested my legal associate to write to the solicitors for each of the parties noting the three agreements and, given that they are not part of an affidavit, advising firstly, of my intention to admit those documents into evidence and secondly whether there were any objections to the tender. Given that no application was made I admitted that material as evidence.
To make it clear as there are two rates claimed on hourly rates for solicitors pursuant to the first agreement as in the first agreement as against the second agreement, any determination made by me would be on the basis of the costs claimed in the first agreement being the lesser of the two.
Written submissions were made on behalf of the Executors dated 13 August 2014 in which they sought costs orders and if that such orders be assessed:-
a)For the whole of the proceedings on an indemnity basis; or in the alternative,
b)On a party-party basis from the commencement of the proceedings until the date of death the Respondent and on an indemnity basis from 28 May 2013 to the conclusion of the proceedings; or further in the alternative;
c)On a party-party basis for the whole proceedings; or further in the alternative;
d)Such basis or combination of basis as the Court shall determine.
The Applicant opposed the making of any costs orders, whether on a party/party basis or otherwise.
BACKGROUND
Some of the background has been set out earlier in terms of the parties and I repeat that which was set out in paragraphs 11 to 34 of the substantive reasons:-
11. Mr Eddington was born in 1949 and was aged 63 when he died in 2013. Ms Hayes was born in 1962 and was aged about 52 at the time of the hearing of this application.
12. D (“the child”) is a child of the parties and is aged eight.
13. Mr Eddington knew that he was very sick and on 21 December 2012 he made a Will (“the Will”) and appointed the respondents as executors of his estate. A copy of the Probate and the Will were in evidence before me. In the Will, Mr Eddington made provision for the child, namely:-
·A gift of $1,000,000 provided the child attain the age of 18 years[3]. There is a discretionary provision for the Executors to make payments to or for the child out of the income and capital of that gift for the child’s maintenance, education and advancement prior to his 18th birthday. [4]
[3] Annexure B, Clause 4.1 to the affidavit of the Executors filed16 May 2013.
[4] Ibid at Clause 10.
·A gift of a German motor vehicle. This gift vests on the child’s 21st birthday.[5]
[5] Ibid at Clause 7.8.
·A monthly payment of $1,500 to be paid to Ms Hayes for the maintenance, education and advancement of the child.
14. As to Ms Hayes, Mr Eddington’s Will provided a gift to her of $150,000 dollars. That gift was conditional upon Ms Hayes:-
·Not challenging the validity of the Will or any part of it; or
·Not obtaining an order against him in the Family Law proceedings; or
·Not having the Family Law proceedings still pending at the date of his death.[6]
[6] Ibid at Clause 4.8.
15. It was submitted by senior counsel for the Executors that such a gift had lapsed following the continuation of these proceedings after the death of Mr Eddington.
16. It was not in issue that Mr Eddington and Ms Hayes did not reside in the same home during the term of the alleged relationship, they resided in different residences. Ms Hayes asserted that they spent significant time together and that they lived in a de facto relationship within the meaning defined under the Act. Mr Eddington deposed that he and Ms Hayes had never been in a de facto relationship within that meaning.
17. The chronology of events in these proceedings is pivotal to the determination.
18. On 4 April 2012 Ms Hayes filed an application in the Family Court by which she commenced proceedings against Mr Eddington pursuant to Part VIIIAB of the Act. Ms Hayes sought unspecified property orders, periodic spousal maintenance and capitalised spousal maintenance.[7]
[7] The maintenance proceeding could not continue in any event given the provisions of Division 2 of Part VIIIAB of the Act and in submissions on behalf of Ms Hayes – Exhibit “H1”.
19. The originating proceedings had been listed for a case conference on 2 July 2012. The application was not served until late July or early August 2012.
20. Within a short time after service of the application the legal representative for Mr Eddington raised the issue of jurisdiction with Ms Hayes’s legal representatives.
21. On 1 November 2012 Ms Hayes filed an amended initiating application seeking a declaration (on both a final and interlocutory basis) pursuant to s 90RD of the Act as to the existence of a de facto relationship between herself and Mr Eddington between 1998 and June 2012. She sought consequential orders for an adjustment of property and spousal maintenance.
22. Prior to the death of Mr Eddington, each of the parties and their witnesses filed affidavits as to their respective versions of the facts about the alleged de facto relationship.
23. Mr Eddington died in 2013.
24. On 30 April 2013 Probate of the Will was granted to the Executors by the Supreme Court of Victoria.[8]
[8] Exhibit B to affidavit of Executors sworn 16 May 2013.
25. After probate of the Will was granted, Therese Cambareri (who is the child’s litigation guardian) commenced Supreme Court proceedings on the child’s behalf challenging the terms of the Will.
26. On 1 November 2012 Ms Hayes filed an amended initiating application in this court seeking a declaration (on both a final and interlocutory basis) pursuant to s 90RD of the Act as to the existence of a de facto relationship between herself and Mr Eddington between 1998 and June 2012. She sought consequential orders for an adjustment of property and spousal maintenance.
27. In May 2013 the Executor applied to this Court for a number of orders, the first being an order that they be permitted to be substituted in Mr Eddington’s place under s 90SM(8) of the Act. They also sought an order that the proceedings be dismissed on the basis that this Court had no jurisdiction to determine Ms Hayes’s Part VIIIAB property and maintenance applications.
28. On 28 August 2013 senior counsel for the Executors prepared written submissions in support of the application in a case.[9]
29. The application in a case was considered by Bennett J on 29 August 2013. Her Honour made orders substituting the Executors as parties to these proceedings and listed the remainder of the application in a case before her for hearing on 24 February 2014. In addition she listed the proceedings for a compliance check on 2 February 2014.
30. In addition directions were made for filing written submissions. Ms Hayes’s legal representatives filed an outline of argument in opposition on 25 November 2013.[10] Submissions by the Executors in response were filed on 16 January 2014.[11]
31. Justice Bennet became indisposed in February 2014 and the proceeding came before Justice Cronin on 18 February 2014. At that time senior counsel for Ms Hayes sought to file a further amended application. In that further amended application it was asserted that the relationship between Ms Hayes and Mr Eddington broke down sometime between January 2012 and late March 2012. In the face of opposition by senior counsel for the Executors that application was not pressed. Ms Hayes sought to rely upon further affidavits; directions were made as to dealing with objections in respect of those affidavits.
32, The matter then came before me for determination on 24 March 2014. When the submissions were about to commence senior counsel for Ms Hayes endeavoured to file a further application in Court (this document was identical to the one sought to be filed before Cronin J but with the word ‘Further’ blacked out on the front page). Ms Hayes was not permitted to file that application.
33. Ms Hayes sought to rely upon evidence contained in her further affidavit filed 14 February 2013 and that of her solicitor filed the same day. I heard and determined that application and gave ex tempore reasons Hayes v Eddington [2014] FamCA 243. The material was generally ruled inadmissible.
34. On the 25 March 2014 senior counsel for Ms Hayes made an oral application that I disqualify myself from the further hearing of the proceedings on the basis of perceived bias. I heard and determined that application and gave ex tempore reasons Hayes v Eddington (No.2) [2014] FamCA 244. Ms Hayes’s application was dismissed.
[9]Exhibit E1.
[10] Exhibit H1.
[11] Exhibit E2.
In addition I note the following facts.
The Executors were entirely successful in their application to dismiss the proceedings based upon the lack of jurisdiction and the Applicant was totally unsuccessful.
The Applicant pressed her substantive application when it should have been obvious to her that the Court was without reason. The issue of jurisdiction was made clear to the Applicant and her legal advisors within a short time after service of the application.[12]
[12] See paragraphs 20 and 48 of the reasons.
In her financial statement filed 4 April 2012 the Applicant sets out that she has the following income:-
Wages $171 per week
Interest from a bank $461 per week
Child support (up to time of Mr
Eddington’s death) $362 per week
Payment for the child from the estate
of Mr Eddington $1,500 per month
She also deposes that she receives family tax benefits.
The Applicant says she has a home valued at $975,000, a holiday home valued at $600,000 and about $395,000 in the bank. She owns an motor vehicle with a value of $25,000 and superannuation of $415,000.
It was argued on behalf of senior counsel for the Executors that the Applicant may have indemnity against her former lawyers given the evidence contained in the affidavit of Mr Gleezer.[13] It was argued that any costs order (whether indemnity or otherwise) would have no practical effect on the Applicant.
[13] At paragraphs 64 and 65 of the reasons.
I was not privy to the communications which may or may not have occurred between the Applicant and her then solicitors (they are no doubt a matter of legal profession privilege). As such I cannot and do not treat any costs order as one to which the Applicant may be indemnified by her former solicitors.
I accept that the estate of the Respondent has been valued for probate purposes at $5,205,007.03 and there is in addition superannuation of $947,093.48 which does not form part of his estate.
The beneficiaries are identified in the will and given that the Applicant did not discontinue the proceedings, I have treated the gift to her as failing to vest.
I accept the submissions made by senior counsel on behalf of the Executors that:-
(a)The Executors conducted the litigation in a professional and dispassionate manner and whilst he was alive the Respondent maintained that there was never a de facto relationship.
(b)That the Respondent’s legal practitioner, Mr Gleezer, had raised the question of jurisdiction very early in the proceedings. I have referred to that circumstance earlier.
(c)The Applicant, either directly or through her solicitor, failed to comply with the pre-action procedure (Rule 1.05(1)) and failed to promptly serve the application as soon as possible after filing (Rule 7.4(1)(a)) particularly given Exhibit RG1 to the affidavit of Mr Gleezer filed 28 May 2013.
(d)Through her then solicitors the Applicant endeavoured to negotiate a settlement whilst holding an issued but unserved initiating application of which the Respondent was not made aware.
(e)That after the death of the Respondent the Executors made an application and provided notice of their argument in writing, including comprehensive written submissions filed and served in August 2013 (Exhibit E1). Further comprehensive submissions were filed in response and a Notice of Objection to Evidence was filed pursuant to an order of Cronin J made 18 February 2012.
(f)That the Applicant filed lengthy argumentative and prolix affidavits including that filed and sworn on 1 November 2012. When confronted with the inevitability of an outcome based on the jurisdiction on the argument (on which the Applicant was aware) the Applicant endeavoured to file a further affidavit in which she asserted that while she believed the relationship lasted until June 2012 from the perspective of the Respondent the relationship broke down before the issue of proceedings.
(g)This needed to be seen in the context of her first initiating application, being one in which she stated that a de facto relationship had not broken down.
THE LAW
There are two areas to which I need to address the law, the first in relation to whether a costs order ought to be made at all. The second in relation to whether it ought to be an indemnity costs order.
The power to make costs orders are set out in s 117 of Act which provides:-
(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.
In Penfold v Penfold (1980) FLC 90-800 the majority of the High Court expressed the general rule that s 117(1) is not paramount to s 117(2) of the Act. A court must make a finding that there are circumstances justifying the making of a costs order before proceeding to make the orders. I accept that there is no guidance in the legislation between the two sub sections nor any additional special onus on the Applicant for an order as to costs.[14]
[14] At paragraph 5 of the written submissions by senior counsel for the Executors.
Senior counsel for the Executors submitted:-[15]
Circumstances which justify the making of an order for costs must be found before consideration of what order for costs is to be made. There is a danger of conflation of the discretion in s 117(2) with the matters in s 117(2A). Therefore, the court must take care to identify the matters which enliven its determination to make an order without resorting to a consideration of the factors which may affect what order (if any) is to be made. While conflation must be avoided, the factors which can inform the exercise of the discretion may be the same or similar to the factors in s 117(2A), but the use to which they are put is different (See Bevan and Bevan (2013) FLC ¶93-545 at paragraph 89).
[15] At paragraph 6 of the Executors written submissions filed 14 October 2014.
In these proceedings I am satisfied that there ought to be a departure from s 117(1) that each party should bear their own costs given that the Applicant was wholly unsuccessful, that the Executors (in respect of the work undertaken by them as case guardians) is not recovered from them but will be charged to the estate of the Respondent, that the Applicant pressed her case where there was no jurisdiction and of which she was informed. In those circumstances I am satisfied that the proceedings amounted to an abuse of process.
The next step is to consider the matters set out in s 117(2A). In Brown v Brown (1998) FLC 92-822 Kay J said when determining whether a costs order ought to be made:-
9. Mr Sweeney sought an order for costs of ''the pre-trial and the proceedings since the pre- trial''. That appears to be a reference to an earlier mention before the matter came on before Mushin J as well as any costs that had been incurred since that time. His Honour invited some submissions about the matters and then his Honour said as follows:
`` Yes. There is no question that costs will be paid for the reason that this matter should have been raised on the wife's side a long time ago. The fact that it has not, has occasioned an adjournment which could have been avoided. The whole thing could have been done administratively by way of inquiry through the List Registrar to me and the matter could have been determined straight away. I do not know how you quantify your costs Mr Sweeney.''
There is nowhere in s 117(2A) that says one factor is providing any hierarchy in relation to the factors. One factor may be enough. As such the Court has a wide discretion.
It is of value to consider the difference between the various types of unquantified costs orders available under the Act. There are many variations of types of costs orders, but they generally fall into three types:-[16]
a)Party and party costs - which are calculated having regard to the schedule of costs under the Family Law Rules 2004 (Cth);
b)Lawyer and client costs – these are essentially indemnity costs, with the onus upon the costs applicant to satisfy the taxing authority that such costs are on balance fair and reasonable; and
c)Indemnity costs[17] - these are essentially lawyer and client costs, with the onus upon the costs respondent to satisfy the taxing authority that such costs are on balance not fair and reasonable, that is the reversal of the onus of proof.
[16] Rule 19.18(1)(b).
[17] See also Rule 19.08(3).
It should be borne in mind that costs orders are restorative and not punitive, and costs cannot exceed the amount actually incurred. They are an indemnity or partial indemnity, see Cachia v Hanes (1994) 179 CLR 403, where the plurality of the Court, comprising Mason CJ, Brennan, Deane, Dawson and McHugh observed:-[18]
Whilst the restricted basis upon which party and party costs are awarded may be debated as a matter of policy, it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred, let alone total recompense for work done and time lost. Putting to one side the question posed by the relatively rare exception of a solicitor acting in person, there is no inequality involved: all litigants are treated in the same manner. And if only litigants in person were recompensed for lost time and trouble, there would be real inequality between litigants in person and litigants who were represented, many of whom would have suffered considerable loss of time and trouble in addition to incurring professional costs. The partial indemnity which the law allows represents a compromise between the absence of any provision for costs (which prevails as a matter of policy in some jurisdictions) and full recompense. In these days of burgeoning costs, the risk of which is a real disincentive to litigation, the proper compromise is a matter of both difficulty and concern.
[18] At pages 414 and 415.
In terms of s 117(2A):-
Section 117(2A)(a) the financial circumstances of each of the parties to the proceedings;
Given her statement of financial circumstances and the bequest from the estate for the child the Applicant has an income of about $780 per week plus family tax benefits. In addition as at the time of filing her financial statement she asserted she has property to the value of about $1,970,000, an Audi car and superannuation of $415,000. As I indicated earlier I give no weight to the submission in relation to the possible action that the Applicant may or may not have against her former solicitors. I reiterate the value of the estate at about $5.2 million dollars plus a superannuation interest which does not form part of the estate.
The Estate is able to bear the costs orders and the Applicant is reasonably able to meet them.
Section 117(2A)(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;
There is no evidence that either party were in receipt of legal aid or assisted by way of legal aid.
Section 117 (2A)(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;
As to the conduct of the proceedings I repeat the comments I have made earlier in terms of the conduct of the proceedings by the Executors and the evidence of the Respondent where he maintained there was no de facto relationship. This includes:-
a)the raising of the issue of jurisdiction early and failure by the Applicant (and perhaps those who advised her at that time) to consider discontinuance and recommencing proceedings.
b)the conduct of the Applicant in commencing proceedings and then delaying service of the proceedings and endeavouring to engage the Respondent in negotiations without informing him that proceedings were on foot.
I repeat the approach in terms of the conduct of the Executors and that of the Applicant to which I have alluded to earlier and which is set out in paragraphs 8(g), (h), (i) and (j) of the submissions made on behalf of the Executors in 2014.
Section 117(2A)(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
There were no submissions in relation to the parties’ failure to comply with previous orders of the Court.
Section 117(2A)(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
The Applicant was wholly unsuccessful in the substantive proceedings.
Section 117(2A)(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
There were no submissions made to me in relation to offers such as would impact on the costs orders.
Section 117(2A) (g) such other matters as the court considers relevant.
I have considered the factors and facts set out above separately and as a whole.
Conclusion as to costs
I am conscious of the imperative that costs orders ought to not generally be made in proceedings under the Family Law Act.
However, given all of those circumstances and considering the submissions of the Respondent in the context of those by the Applicant and the underlying facts set out in these reasons and the substantive reason I determine that a costs order ought to be made in respect of both the substantive proceeding and this costs application.
Indemnity Costs
Senior counsel for the Executors elegantly set out the principals when considering costs being assessed and determined on an indemnity basis and as summarised in Muldoon v Carylye (2012) FLC 93-513 where the Full Court said:-
115.It is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated that there are exceptional circumstances, such that the usual order for party-party costs should be departed from (Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225; Kohan and Kohan (1993) FLC 92-340; Munday v Bowman (1997) FLC 92-784; Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029; Limousin & Limousin(Costs) (2007) 38 Fam LR 478; Fennessy &Gregorian (2009) FLC 93-399; D & D (Costs) (No 2) (2010) FLC 93-435, Stephens v Stephensand Anor (2010) 44 Fam LR 117). As was said by the Full Court in Stephens (at [67]):
An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages …
116.In support of the application for indemnity costs, counsel pointed only to the fact that it was always apparent there was no merit in the appeal. This is in our view not an exceptional circumstance as would justify an order for indemnity costs.
The Full Court in Prantage v Prantage [2013] FLC 93-544 confirmed that there needed be exceptional circumstances to justify an order for indemnity costs.
It is necessary for the Court to have the terms of the costs agreement to assess the difference between party/party and indemnity costs. Rule 19.08 provides:-
19.08(1) A party may apply for an order that another person pay costs.
19.08(2)An application for costs may be made:
(a)at any stage during a case; or
(b)by filing an Application in a Case within 28 days after the final order is made.
19.03(3) A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
Note 1 The Court may make an order for costs on its own initiative (see rule 1.10).
Note 2 A party may apply for an order for costs within 28 days after the filing of a notice of discontinuance by the other party (see subrule 10.11(4)).
Note 3 A party may apply for an extension of time to make an application (see rule 1.14).
Note 4 For costs orders related to appeals, see Part 22.10.
Having regard to the approach adopted by the Full Court in Kohan v Kohan (1993) FLC 92-340 I have compared the costs pursuant to the costs agreement (at least the first and third costs agreements and the scale under the Rules).
Given the factors to which I have referred to earlier in these reasons I am satisfied that in this case there are the exceptional circumstances such as would base such a draconian order.
I reiterate the observations of the Full Court in Prantage v Prantage (supra) where Thackray and Ryan JJ observed:-
100.His Honour’s statement, at [50], that Sheppard J’s emphasis in Colgate-Palmolive was “on parties who must have or should have known their approach was simply imprudent” does not, in our view, accurately reflect the law as explained in Colgate-Palmolive and other cases dealing with indemnity costs.
101.It is true, as the trial Judge noted, that Sheppard J included in the list of situations that might give rise to an order for indemnity costs “the imprudent refusal of an offer to compromise”. However, in our view, imprudence by a party in “their approach” is not sufficient to enliven the power to award indemnity costs.
102.It is important in this context to recognise, as Lindgren J did in NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [56], that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation”.
103.Lindgren J went on to point out (original emphasis):
Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant. But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.
I refer to the factors to which I have discussed earlier in light of the evidence, including that the Applicant did not recognise the lack of jurisdiction and when pressed on that point in mid-August 2012 pursued the proceedings in the absence of that jurisdiction.
I accept and adopt the submissions made on behalf of the Executors that it was an abuse of the process of the Court by filing and not serving the initiating application and by endeavouring to negotiate with the Respondent without disclosing that the proceedings were on foot.
Given those circumstances and those submissions, I am satisfied that this is indeed one of those rare cases where the facts are such that the circumstances are within the scope of exceptional circumstances which would warrant the making of such an order and I intend to do so.
I certify that the preceding fifty two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 7 November 2014.
Associate:
Date: 7 November 2014
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