Falk & Falk
[2022] FedCFamC1F 28
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Falk & Falk [2022] FedCFamC1F 28
File number(s): SYC 4653 of 2019 Judgment of: HENDERSON J Date of judgment: 1 February 2022 Catchwords: FAMILY LAW – COSTS – where the husband sought costs on an indemnity basis against the wife – where the husband made multiple attempts to settle an application for interim property distribution – where wife’s conduct was exceptional, bordering on wilful – costs ordered on an indemnity basis Legislation: Family Law Act 1975 (Cth) s 117, 117(2), 117(2A)
Family Law Rules 2004 (Cth) r 19.8(1)(a)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17(1)(a)
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70
Kohan & Kohan (1993) FLC 92-340
Moorcroft & Moorcroft [2017] FamCAFC 147
Munday v Bowman (1997) FLC 92-784
Penfold v Penfold (1980) 144 CLR 311
Phillips & Hansford (2020) FLC 93-941
Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
Rankin & Rankin (No. 3) [2019] FamCAFC 133
Sfakianakis & Sfakianakis (2019) Fam LR 419
Smith & Fields (third party costs) [2013] FamCA 505
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported)
Worth & Worth (No. 2) (2019) FLC 93-910
Division: Division 1 First Instance Number of paragraphs: 49 Date of last submission/s: 22 December 2021 Date of hearing: 23 July 2021 Place: Sydney Counsel for the Applicant: Mr Cummings SC Solicitor for the Applicant: ATW Family Law Counsel for the Respondent: Ms Bennett Solicitor for the Respondent: Dorter Family Lawyers & Mediators ORDERS
SYC 4653 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR FALK
Applicant
AND: MS FALK
Respondent
ORDER MADE BY:
HENDERSON J
DATE OF ORDER:
1 FEBRUARY 2022
THE COURT ORDERS THAT:
1.That the wife pay the husband’s costs on an indemnity basis in the amount of $42,108 within 90 days of the date of delivery of this judgement
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Falk & Falk is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
This is an application by the husband for his costs arising out of a successful interim hearing. The husband sought by way of interim property distribution that he be entitled to his interest in the parties self-managed superannuation fund. The wife resisted this application and was wholly unsuccessful in her resistance and counter offer that he receive $100,000 only. The husband was wholly successful in his application to receive his entitlement to his superannuation in the sum of $1.2 million or thereabouts.
I delivered judgement on 6 August 2021 finding as follows.
That the husband was retired and able to access his share of funds in the parties self-managed superannuation fund.
That releasing his share of funds in the self-managed superannuation fund of $1.227 million together with what the wife says has been wastage of matrimonial assets totalling $1.2 million, giving him $2.5 of matrimonial assets would not jeopardise her final application for an equal division of the matrimonial pool which the wife asserted was $9,962,403.50 as at the hearing. The evidence at the hearing supported an asset pool in excess of $11 million on the filed material.
In light of these facts the wife’s resistance to the husband’s application was at best imprudent and at worst maintained for an ulterior motive. Further the wife’s attitude not only wasted the husbands resources in incurring unnecessary legal fees but also the scarce resources of the Court, a matter now well enshrined as relevant to consider under the new case management structure of the Federal Circuit and Family Court of Australia and cores principles which relevantly are as follows:
1. Purposes
1.1 The purposes of this Central Practice Direction are to outline the core principles applicable to family law proceedings and to establish a consistent national case management system in the Federal Circuit and Family Court of Australia (the Court) that:
a) reduces unnecessary cost and delay in family litigation and facilitates proceedings being conducted with the least possible acrimony in order to minimise harm to children and families;
b) ensures the safety of families and children; and
c) achieves the overarching purpose of the family law practice and procedure provisions of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act), being to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
1.2 All other Family Law Practice Directions are to be read within the framework established by this Central Practice Direction. Parties should not commence or take steps in proceedings without first considering the principles set out in this Practice Direction.
…
1.4 The Court expects parties and their lawyers to have in mind, at all times, the cost of each step in the proceedings and whether it is necessary, and to avoid unnecessary process-driven costs and unjustified use of court resources. In everything they do, parties and lawyers are expected to approach proceedings in a manner directed towards identifying the issues in dispute and ascertaining the most efficient, including cost efficient, method of resolution or determination. This includes giving proper consideration to identifying the issues in dispute, complying with their obligation to provide full and frank disclosure in a timely manner (see Part 6.1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (the Family Law Rules)), engaging in productive and resolution-focused communication with other parties, making appropriate admissions and pressing only issues of genuine significance. Ambit claims should be avoided and aggressive and unnecessarily adversarial conduct will not be tolerated. At all stages in the proceedings, parties must avoid filing evidence that is unnecessarily lengthy or only of limited relevance to the issues genuinely in dispute. Parties should limit the number of witnesses they rely on to those necessary to prove or disprove those issues truly requiring determination.
1.5 Any failure to comply with these requirements may attract costs orders against parties and/or practitioners and other consequences including, in appropriate cases, the drawing of adverse inferences, the making of a summary decree pursuant to section 45A of the Family Law Act 1975 (Cth) (Family Law Act), or orders providing that a matter be heard on an undefended basis.
The wife’s conduct in this matter is the antithesis of these core principles which came into effect on 3 September 2021 and are therefore not strictly applicable. However it is important to reiterate these core principles in matters where the resistance to an application is doomed at both law and fact from the outset.
The husband seeks his costs of the application on an indemnity basis.
I have read the following
For the husband
(1)Outline of submission for costs filed 21 December 2021
(2)Application for costs and filed 27 August 2021.
(3)Affidavit in support filed 14 December 2021
For the wife
(1)Outline of submissions filed 23 November 2021
(2)My judgment delivered 6 August 2021
THE LAW
It is correct that in family law proceedings each party bears their own costs however the Court retains a discretion to order costs be paid by one party pursuant to section 117(2) of the Family Law Act 1975 (Cth) (“the Act”).
It is a correct statement at law that indemnity costs are only ordered in exceptional circumstances.
The relevant matters under section 117 are as follows:
117 Costs
(1) Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, 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), (4Aw), (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.
(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.
Rule 12.17(1)(a) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) formerly rule 19.8(1)(a) of the Family Law Rules 2004 (Cth) ("the Family Law Rules") permits the Court to order costs in a specific amount and this is an order I will make in the event I determine not to order the wife pay the husbands costs on an indemnity basis for the following.
There is much force in the argument that a judge should assess costs to be awarded if there is sufficient evidence provided to enable the judge to do so for if not, there will be further costs incurred in pursuing a costs order that is not quantified and that is an unacceptable outcome. It is an imperative to minimise costs for all parties in litigation.
The purpose of this rule is practical. It is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation, as referred to by their Honours in the decision of Rankin & Rankin (No. 3) [2019] FamCAFC 133 (“Rankin”) at paragraph 19, which decision was determined under rule 19.18(1)(a) of the then Family Law Rules.
In this decision, their Honours held that they were satisfied that the respondent's schedule of costs filed, read with their respective written submissions, provided sufficient material to enable the Court to justly fix a sum for costs in accordance with the rule and principles as to its application, and they relied upon the decision of Moorcroft & Moorcroft [2017] FamCAFC 147 to support this realistic and practical approach. Although I accept their Honours' statement in Rankin at paragraph 23 which relates to costs in an appeal, there is no impediment to the application of this principle to costs sought in a first instance trial.
The Court further said at paragraph 23 that a “court is not obliged to, nor should it attempt, something akin to a taxation of costs undertaken by an assessor”. [1] That only where the parties have provided sufficient particulars of the costs claimed, and there has been a sufficient challenge to the costs claimed, would the Court been a position to assess the costs.
[1] Rankin & Rankin (No. 3) [2019] FamCAFC 133 at [23].
I must first determine whether I would exercise my discretion to make an order for costs pursuant to section 117(2) of the Act. If I determine that I should exercise that discretion, I must then determine the costs to be paid.
The power to award costs involves a wide exercise of discretion and the breadth of that discretion is not limited as was recognised in a matter of Penfold v Penfold (1980) 144 CLR 311 (“Penfold”). The Court need not be satisfied that all the factors under section 117(2A) of the Act have occurred before making a costs order, rather the Court is required to find a justifying circumstance or circumstances as an essential preliminary step before making any costs Order.
There is voluminous authority from the Full Court of the Family Court and in other jurisdictions in relation to costs and in particular, in relation to indemnity costs. Decisions such as Kohan & Kohan (1993) FLC 92-340 (“Kohan”) are still good authority in relation to the Court's discretion to award indemnity costs and the factors which may weigh upon a judge's exercise of the discretion to so do.
Three recent decisions of Phillips & Hansford (2020) FLC 93-941 (“Phillips”), Rankin,Worth & Worth (No. 2) (2019) FLC 93-910 (“Worth”) and Sfakianakis & Sfakianakis (2019) Fam LR 419 (“Sfakianakis”) all deal with the broad discretion of the Court in relation to a costs application. The power is to award costs on an indemnity basis, solicitor/client basis, party/party basis, scale costs, costs as assessed by the Court or a taxation by a Registrar. As always in family law proceedings, each case turns on its particular and unique facts.
The husband initially sought costs on an indemnity basis in his case outline and Application in a Case filed 8 June 2021. The wife failed to respond to his application for costs by 17 September 2021 as she was ordered to do and I had intended to proceed in her absence.
The wife filed her submissions on 23 November and the husband objects to the Court reading that material. I will read the parties filed material and make a decision based upon their evidence and the law
THE FACTS
The husband seeks $42,108 which are his actual costs including counsels fees for 19 July 2021 of $15,895 and 23 July 2021 of $6,820.
The husband’s submission attached his costs agreement and the costs charged and incurred by him in pursuing his claim
The husband made three offers to settle the matter prior to the hearing on 23 July 2021.
On 19 July 2021 after the matter was before me and could not be heard and I made some preliminary remarks on the wife’s resistance to the husband’s application that he access his entitlement in the parties’ superannuation fund.
On 6 April 2021 where he said he would accept $500,000.
On 10 March 2021 where he sought to access his entitlement in the parties’ superannuation fund.
The husband was wholly successful in all his written offers of settlement.
Indemnity costs are only ordered in exceptional circumstances .The matters of Kohan and Smith & Fields (third party costs) [2013] FamCA 505 dealing with third party costs are all authority for this proposition. The category of cases in which indemnity costs may be awarded are not closed. Costs on this basis have been ordered in matters where an application is pursued with wilful disregard of known facts or clearly established law, where there has been an imprudent refusal of an offer to compromise, as in the decision of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 (“Colgate-Palmolive”).
In relation to pursuing an application with wilful disregard to known facts or clearly established law, the decisions of Phillips, Rankin, and Sfakianakis reiterate that indemnity costs may be awarded where the applicant, properly advised, should have known they had no chance of success and where a party persists in what should, on a proper consideration, be seen to be a hopeless case.
This principle was referred to by his Honour French J in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (No 2) [1993] FCA 70 at [5].
In Worth their Honours quoted from Holden J's decision in Munday v Bowman (1997) FLC 92-784 (“Munday”), where the Court drew the following principles relevant to costs at [9]:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts: see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 .
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud: see Fountain Selected Meats (Sales) Pty Ltd .
(c) Evidence of particular misconduct causing loss of time to the court and to other parties: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (French J, Fed C of A, 3 May 1991, unreported) .
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty Ltd v Westpac Banking Corporation (Davies J, Fed C of A, 5 March 1993, unreported).
(e) An imprudent refusal of an offer to compromise.
As their Honours quote in Worth from Sheppard J in Colgate-Palmolive at [17]:
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course…
It is trite to say that the evidentiary onus is upon the respondents to satisfy me, using Sheppard J's words that “the circumstances of the case must be such as to warrant the Court in departing from the usual course”. [2]
[2] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248 at [17].
The options available to me in determining the cost order to be made are: fixed costs at scale; party/party costs; solicitor/client costs; as assessed in the exercise of my discretion or on an indemnity basis.
Their Honours say in Sfakianakis from paragraph 9:
9. The ordinary position in proceedings under the Family Law Act 1975 (Cth) (“the Act”) is that each party is to bear his or her own costs (s 117(1)). Where the Court is of the opinion that circumstances justify it in doing so, the Court may make such order as to costs as it considers just (s 117(2)). Thus, an order may be made for the payment of costs on an indemnity basis, although such orders are exceptional…
10. It is, however, a mistake to think that if a costs order is made, that order can only be on a party and party basis or on an indemnity basis. The words “such order as to costs … as the court considers just” permit the Court to fashion an order that is apt to the circumstances. One such well-known example is assessment on a trustee basis, which is more generous than party and party costs, but falls short of an indemnity. Orders for a partial indemnity or for a particular period are obvious possibilities. The Court may also fix costs in a particular sum, taking account of all relevant circumstances; that type of order too is neither one for party and party costs nor an indemnity costs order. For convenience, in these reasons we shall refer to such orders as a “special costs order”.
(Citations omitted)
The wife is working and had $1 million or thereabouts of matrimonial assets in her control at the date of the hearing. The wife now asserts via her submissions her resources have been reduced to $130,000 due to living costs and legal fees. I reject that submission in the absence of evidence from her of how this situation has arisen
The first question to be determined is whether I should exercise my discretion to embark upon a decision to make a costs order in favour of the husband.
The wife was wholly unsuccessful in her application the husband receive $100,000 from the self-managed super fund. All her arguments were rejected by me particularly her rejection of the seriousness of the husbands life threating permanent disease of his liver. Concomitantly the husband was wholly successful in obtaining his entitlement to his assets in the self-managed super fund.
The wife imprudently failed to accept two offers made by the husband prior to the litigation commencing. The first was on 10 March 2021 when the husband sought release of his share of the self-managed super fund. No response was received.
The second was on 6 April 2021 when the husband sought the wife pay him $500,000 being one half of the monies she had withdrawn from the parties bank account at separation in 2019 which funds were largely still in existence at the hearing.
The wife did not respond to these offers and the husband commenced proceedings.
The wife imprudently failed to accept an offer made by the husband prior to the hearing made on 19 July 2021.
I find that the wife is in superior financial position to the husband. The wife is working and earning reasonable income and was seized of $1 million of joint monies at the hearing and has failed to adequately explain to the Court how she now only has $130,000.
For all these reasons I have formed the view that I should make a costs order in favour of the husband given that his application was meritorious and the wife’s defence was entirely without merit.
The wife‘s failed to adequately explain her conduct in resisting the husband’s application and I draw the inference she did so for an ulterior purpose for the following. The parties were attending a mediation after the hearing and perhaps the wife believed her resistance would continue to put pressure on the husband to settle as may have been her decision to not respond to his offer to settle before filing on 6 April 2021. Had the wife accepted that offer of $500,000 there would have been no hearing and no costs incurred for either party. The wife remains silent on her reasoning.
The wife did not accept that the husband had a life threatening illness namely acute liver failure which although in remission is a clear threat to his life and he needs funds for a transplant on hand at all times given he is unable to obtain health insurance and is why he is unable to support himself.
I find the wife’s conduct is exceptional and borders on wilful and I will order her to pay the husband’s costs on an indemnity basis in the amount of $42,108 within 90 days of the date of delivery of this judgement.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Henderson. Associate:
Dated: 1 February 2021
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