Ellington and Knight
[2020] FamCA 135
•6 March 2020
FAMILY COURT OF AUSTRALIA
| ELLINGTON & KNIGHT | [2020] FamCA 135 |
| FAMILY LAW – COSTS – Application by the wife for indemnity costs – Where s 117(2A) of the Family Law Act 1975 (Cth) applied – Where the husband was not successful in the proceedings and refused the wife’s offer to settle – Where the husband is in poorer financial circumstances than the wife – Where there is sound reason to depart from the general provision in relation to costs – Where the court is not satisfied that the circumstances justify an order for indemnity costs – Order that the husband pay the wife’s costs of these proceedings as assessed. |
| Family Law Act 1975 (Cth) s 79A and s 117 Family Law Rules 2004 (Cth) r 19.08 and r 19.18 |
| Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202 J Corporation Pty Ltd v Australian Building Labourers Federation Union of Workers (WA Branch)(No 2) [1993] FCA 42 Knight & Ellington [2018] FamCA 892 Knight & Ellington [2019] FamCA 488 Kohan & Kohan (1993) FLC 92-340 Yunghanns & Ors & Yunghanns & Ors & Yungahanns [2000] FLC 93-029 Z (A Solicitor) v Limousin (Costs) [2010] FLC 93-433 |
| APPLICANT: | Ms Ellington |
| RESPONDENT: | Mr Knight |
| FILE NUMBER: | CSC | 677 | of | 2007 |
| DATE DELIVERED: | 6 March 2020 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | Cairns |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 27 February 2020 |
REPRESENTATION
| THE APPLICANT: | In person |
| THE RESPONDENT: | In person |
Orders
That the husband pay the wife’s costs of and incidental to these proceedings as assessed, excluding her costs of and incidental to her Application in a Case filed 2 August 2018.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ellington & Knight has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT CAIRNS |
FILE NUMBER: CSC677/2007
| MS ELLINGTON |
Applicant
And
| MR KNIGHT |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
On 23 July 2019, for reasons then delivered[1] (“the first reasons”) I dismissed property proceedings brought by Mr Knight (“the husband”) against Ms Ellington (“the wife”). Now, by Application in a Case filed 19 August 2019, the wife seeks an order for indemnity costs, or in the alternative, an order for costs on a non-indemnity basis.
[1]Knight & Ellington [2019] FamCA 488.
On 27 February 2020 I heard the parties’ submissions in relation to the wife’s application, and reserved my decision. This is that decision and the reasons for it.
BACKGROUND
The husband is presently 50 years of age, and the wife 46. The parties married on 7 October 1998, and finally separated on 8 August 2006. At the time of their separation, the parties’ principal asset was a property at B Town in North Queensland (“the B Town property”).
On 8 November 2007, consent orders were made in the Family Court of Australia, under which the B Town property was to be listed for sale by private treaty, and the net proceeds of sale divided 30 per cent to the husband and 70 per cent to the wife. However on 13 March 2008, as I found in the first reasons, the husband received a payment from the wife in the sum of $25,000 in discharge of his entitlement under the consent orders.
Whilst it is unnecessary to set out in these reasons the subsequent events, they culminated with the husband commencing proceedings on 10 August 2017 seeking either, pursuant to s 79A(1C) of the Family Law Act 1975 (Cth) (“the Act”), a variation of the 2007 consent orders, or alternatively, for their enforcement. In the first reasons, I rejected both aspects of the husband’s claim. No appeal has been brought from that judgment.
RELEVANT STATUTORY PROVISIONS AND LEGAL PRINCIPLES
Cost orders generally
The starting point for a consideration of these applications is s 117 of the Act which relevantly provides as follows:
117(1) Subject to subsection (2), subsections 45A(6) and subsection 70NFB(1) and sections 117AA, 117AC,each party to proceedings under this Act shall bear his or her own costs.
117(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 (6) 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.
117(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.
…
The Family Law Rules 2004 (Cth) r 19.08(3) imposes a mandatory obligation in the following terms:
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.
Rule 19.18 deals with the method of calculation of costs in the following terms:
19.18(1) The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount assessed in accordance with Schedule 3.
Example
For paragraph (1)(c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.
19.18(2) If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
19.18(3) In making an order under subrule (1), the court may consider:
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
Principles relating to indemnity costs
In order to justify the making of an order for costs other than on a party/party basis, all that is required are particular facts and circumstances of the case in question warranting the making of such an order.[2] That said, such an order is a very great departure from the normal standard, and hence it is imperative that the court be aware of what the nature of the indemnity is, in the sense of what the costs agreement between the parties seeking the order and their solicitors is.[3] That said, such an order remains wholly compensatory and not punitive.[4]
[2]Yunghanns & Ors & Yunghanns & Ors & Yungahanns [2000] FLC 93-029 adopting Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225.
[3]Kohan & Kohan (1993) FLC 92-340 and r 19.08(3).
[4]Muldoon & Carlyle (2012) FLC 93-513 at [114].
It is well established that proceedings brought in wilful disregard of known facts or clearly established law are one of the established categories which justify indemnity costs.[5] An instance of that in this court is the decision of Limousin[6] where the Full Court did not disturb a costs order against a solicitor who had failed to have any proper regard to the prospects of success of a claim.
RELEVANT S 117(2A) CONSIDERATIONS
[5]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; J Corporation Pty Ltd v Australian Building Labourers Federation Union of Workers (WA Branch)(No 2) [1993] FCA 42; Colgate-Palmolive (supra) and Yunghanns (supra).
[6]Z (A Solicitor) v Limousin (Costs) [2010] FLC 93-433.
Parties’ financial circumstances
I do not have up-to-date financial information in relation to either party. Although I pointed this out to the parties at the hearing of the costs application, neither party sought to augment the material that was before me so as to update the evidence as to their financial circumstances. That said, as at the time of the first reasons, the wife owned the B Town property, over which there was secured a mortgage in favour of her mother of slightly in excess of $400,000, and there was also a further mortgage to the National Australia Bank in the sum of $100,000, which loan appears to have been used to meet the wife’s legal fees in this litigation.
In 2019 the value of the B Town property was said to be $755,000. I do not have a current valuation. However it appears as though the wife may presently have equity in the B Town property somewhere in the order of $250,000.
It appears as though the husband has little, if any, assets of substance.
The wife is in full time employment in the maritime industry at City L. The most recent information in relation to the husband was that he was employed in hospitality in Victoria. I infer that it is likely that the wife earns more than the husband.
The conclusion which I draw is that the wife is likely in a better financial position than the husband, both by reference to her assets and her income. That said, the wife is primarily responsible for the costs of maintaining the parties’ only child who is presently 16 years of age. It appears as though the husband pays some, but not a great amount, of child support to the wife.
Legal aid
Neither party was in receipt of legal aid.
Conduct of parties in the proceedings
The wife points to the fact that the husband commenced these proceedings in Victoria when, other than him living there, they had no connection with that State. Further she points to the difficulty in obtaining disclosure from the husband during the course of the litigation.
Although it is not a matter that was raised by the wife, I note that inexplicably, prior to the trial commencing in July 2019, neither party had obtained nor inspected the wife’s solicitor’s file relating to the 2008 transaction, which was critical in the litigation, because it contained independent and contemporaneous documentary evidence of the parties’ conduct in 2008. The fact that the matter proceeded to trial without either party inspecting that file is extraordinary.
One final matter is that, on 2 August 2018, the wife brought an application for summary dismissal of the husband’s claim, or in the alternative security for costs. I dismissed that application on 5 November 2018 for reasons then published (Knight & Ellington [2018] FamCA 892).
Non-compliance with previous orders
As I found in the first reasons, neither party had complied with the consent orders of 2007, in that the wife had failed to proceed to sell the B Town property, and further, the husband had failed to meet his obligations to contribute to the mortgage payments under those orders. However that conduct was explicable, as I ultimately found, by the parties having, in effect, replaced the 2007 consent orders with the 2008 agreement. Therefore the proceedings commenced by the husband were not necessitated by either parties’ failure to comply with the previous orders.
Wholly unsuccessful
The husband was wholly unsuccessful in the proceedings.
Offers to settle
The wife has made several offers to settle this litigation, on the basis that, in effect, both parties walk away. However, significantly, on 5 February 2019, her solicitors offered to settle the proceedings on the basis that the husband receive the sum of $10,000 within 60 days, but that otherwise his application be dismissed with no order as to costs. Her solicitors identified in that letter that the offer would remain open for 48 hours, and if not accepted, but the wife did better than that at trial, she would seek costs on an indemnity basis. Plainly two things need to be said in relation to that offer. The first is that the husband did not do better, but did considerably worse than that at trial. The second is that the wife thereafter incurred significant costs in preparing and conducting the trial of the matter.
Other relevant matters
The wife contends that the husband’s commencement of the proceedings was simply an attempt to bully money out of her, given her inevitable reluctance to proceed to trial. Moreover, at trial she pointed to the fact that the husband had delayed excessively in commencing the proceedings, including failing to respond to correspondence sent to him by the wife’s solicitors for something in the order of two years.
EVALUATION
Costs generally
I am satisfied that, in the circumstances of this case, there is sound reason for departing from the general provision in relation to costs, and that it is just that the wife recover her costs of the proceedings, excluding her costs of the unsuccessful summary dismissal and security for costs applications. Particularly, I place weight upon the husband’s lack of success in the proceedings, and his refusal to accept the wife’s offer to settle of 5 February 2019. I do not overlook the fact that he is in poorer financial circumstances than the wife is, but impecuniosity is not a bar to a costs order, if the other circumstances nonetheless justify it.
Indemnity costs
The total of the wife’s costs claimed is in the sum of $100,741.32. There are further disbursements directly undertaken by the wife towards valuations of $6,270. The wife also claims to be entitled to personal expenditure associated with the litigation. Therefore it can be seen that the indemnity which the wife seeks is likely in the order of $110,000.
I am not satisfied that the husband brought these proceedings in wilful disregard of known facts. Rather, his error was in either not actually recalling the facts, or properly construing the facts that were known to him, namely that the parties had agreed to substitute the payment of $25,000 to him for his entitlement under the consent orders. He contended that, in effect, the $25,000 was an advance payment of his entitlement. That was not supported by the contemporaneous material, however again I point out that neither party obtained or disclosed, much less inspected, the wife’s solicitor’s file from 2008. It was a critical document. The wife ought to have disclosed it to the husband at the very commencement of the proceedings, and had she done so, and had she emphatically pointed to the nature of the correspondence which it contained, then perhaps there may have been a better argument on her part for indemnity costs.
I have given some consideration as to whether the offer to settle for $10,000 on 5 February 2019 might justify an order for indemnity costs after that date. However I am not satisfied that letter, of itself and without more, comprises a circumstance sufficient to justify an order for indemnity costs.
CONCLUSION
For these reasons there will be an order that the wife recover her costs of an incidental to the proceedings as assessed, excluding her costs of an incidental to the application for summary dismissal and security for costs.
I certify that the preceding twenty nine (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 6 March 2020.
Associate:
Date: 6 March 2020
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