Falk & Falk (No 3)

Case [2024] FedCFamC1F 361

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Falk & Falk (No 3) [2024] FedCFamC1F 361

File number: SYC 4653 of 2019
Judgment of: CAMPTON J
Date of judgment: 30 May 2024
Catchwords: FAMILY LAW – COSTS – Application by the wife for the husband to pay her costs of the substantive proceedings on an indemnity basis, or in the alternative, pursuant to Sch 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) – Where the husband withdrew his consent to the making of the proposed consent orders executed at mediation and subsequently did not accept the wife’s offer of settlement made in the same terms pursuant to the Rules as the executed consent orders requiring the proceeding to progress to trial – Where the husband failed to attend the trial and it proceeded on an undefended basis – Where a consideration of all of the circumstances are not so exceptional as to warrant an order for indemnity costs but the quantum of costs ought be more than that calculated pursuant to the Rules – Husband ordered to pay the wife’s costs fixed in the sum of $178,500.
Legislation:

Family Law Act 1975 (Cth) ss 79 and 117

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Div 4.2.2, r 12.17, Sch 3
Cases cited:

Browne & Green (2002) FLC 93-115; [2002] FamCA 791

Calderbank v Calderbank [1975] 3 AII ER 333

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225

Falk & Falk (No 2) FedCFamC1F 97

Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23

Kennon v Kennon (1997) FLC 92-575; [1997] FamCA 27

Kohan & Kohan (1993) FLC 92-340; [1992] FamCA 17

Mansfield and Ors & Mansfiled and Anor (2019) FLC 93-920; [2019] FamCAFC 186

Phillips & Hansford (2020) FLC 93-941; [2020] FamCAFC 28

Sfakianakis & Sfakianakis (2019) Fam LR 419; [2019] FamCAFC 54
Division: Division 1 First Instance
Number of paragraphs: 43
Date of hearing: 27 May 2024
Place: Sydney
Solicitor for the Applicant: Dorter Family Lawyers and Mediators
Counsel for the Respondent: Mr Brickwood
Solicitor for the Respondent: Vizzone Ruggero Twigg Lawyers

ORDERS

SYC 4653 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS FALK

Applicant
AND:

MR FALK

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

30 MAY 2024

THE COURT ORDERS THAT:

1.The husband pay the wife’s costs fixed in the sum of $178,500 within 28 days.

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).

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AGLC
Falk & Falk (No 3) [2024] FedCFamC1F 361
Case
[2024] FedCFamC1F 361
Decision Date

CaseChat Overview and Summary

The case of Falk & Falk (No 3) involves a dispute between a husband and wife regarding costs in the context of their property settlement proceedings. The wife had initiated the proceedings on 17 July 2019, and the husband responded on 17 September 2019, seeking different orders regarding property adjustment. After a lengthy and contentious litigation process, the parties engaged in mediation on 4 March 2022, resulting in an executed minute of consent order. However, the husband subsequently withdrew his consent to the agreement on 7 March 2022, leading to the continuation of the litigation. The case was ultimately decided on 28 February 2024, with the wife being awarded 25 per cent of the property and the husband 75 per cent.

The legal issues before the court were whether the husband should be ordered to pay the wife's costs on an indemnity basis or pursuant to Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). The court had to consider the relevant principles regarding costs, including the starting position that each party pays their own costs, and the circumstances in which the court may order costs to be paid by one party to another.

The court found that while the circumstances did not warrant an order for indemnity costs, the husband's conduct, particularly his failure to accept the wife's offer of settlement made in the same terms as the executed consent order, justified an order for costs to be paid by the husband. The court noted that the husband's failure to attend the final mediation and the trial, and his lack of explanation for resiling from the executed consent orders, were significant factors in favour of the wife. The court also considered the financial circumstances of the parties, with the husband having superior resources compared to the wife.

The court concluded that the husband should be ordered to pay the wife's costs fixed in the sum of $178,500 within 28 days. This decision was based on the husband's failure to attend the mediation and the trial, his failure to provide any explanation for resiling from the executed consent orders, and the financial disparity between the parties.

The final orders of the court were that the husband pay the wife's costs fixed in the sum of $178,500 within 28 days. This decision reflects the court's view that the husband's conduct warranted an order for costs to be paid by him to the wife, despite the absence of exceptional circumstances justifying an indemnity costs order.

Orders

Orders of the court

SYC 4653 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS FALK

Applicant

AND:

MR FALK

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

30 MAY 2024

THE COURT ORDERS THAT:

1. The husband pay the wife’s costs fixed in the sum of $178,500 within 28 days.

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).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

For the reasons that follow, the husband is ordered to pay the wife’s costs fixed in the sum of $178,500 within 28 days.BACKGROUND The wife was born in 1958 and is currently 65 years old. The husband was born in 1963 and is currently 60 years old. They commenced cohabitation in early 2009, married in 2010, separated on 10 April 2019, and were divorced in 2021. There are no children of the marriage. The wife initiated the s 79 proceedings on 17 July 2019. The husband, by way of a Response filed on 17 September 2019, sought different orders adjusting property between he and the wife. Both parties agree that the proceedings were hard fought over a period of five years, with 61 court listing events. Both parties had the benefit of briefing senior counsel over the course of the litigation. On 4 March 2022, the parties engaged in a mediation with Mr AF. They reached an agreement which was reduced to writing in the form of executed an minute of consent order. On 7 March 2022, the husband withdrew his consent to that compromised agreement. On 24 November 2022, the matter was listed for final hearing for five days commencing 19 February 2024. On 15 February 2024 the parties were advised that due to judicial unavailability the hearing could not proceed as scheduled. The parties then agreed to attend a second mediation on 19 February 2024 with Mr EE. On 19 February 2024, the mediator, the wife, her solicitors, together with her senior counsel and junior counsel, and the husband’s solicitors, senior counsel and junior counsel, all attended the mediation. The husband did not attend. The mediation was aborted. On 21 February 2024, the proceeding was listed on short notice for final hearing over five days commencing 26 February 2024. For reasons as expressed in the primary judgment delivered on 28 February 2024, the trial proceeded on an undefended basis as against the husband over a single day on 26 February 2024 (see Falk & Falk (No 2) FedCFamC1F 97). These reasons assume familiarity with that primary judgment. The orders made on 28 February 2024 broadly determined that the wife have the benefit of 25 per cent of the property of the parties, valued at $2,522,472, and the husband 75 per cent, valued at $7,567,415. The wife’s updated costs notice identifies that she has expended in the range of $650,000 in conducting the litigation. The husband’s updated costs notice indicates that he has expended in the range of $865,000 in the conduct of the litigation. The wife’s costs of prosecuting this costs application are $9,000. The husband’s costs of responding to this application are $8,500.THE LAW The relevant principles as to costs are well settled. While the starting position established by s 117(1) of the Act is that each party pays their own costs, s 117(2) allows the Court to make such orders as to costs as it considers just if there are circumstances which justify it doing so. In considering what order for costs, if any, should be made, the Court is required to have regard to the matters set out in s 117(2A) of the Act and give weight as it considers appropriate to any relevant factor. It is well settled that no single factor in s 117(2A) has priority, nor must more than one factor be satisfied. Rather, any one factor may be sufficient.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

A party cannot reject or ignore a reasonable offer seriously made in property adjustment litigation except at their own peril as to costs. The Act and the Rules are constructed to sharpen the minds of litigants who elect to “roll the dice” by ignoring or rejecting a well-cast reasonable offer. The terms of the May 2022 offer made by the wife were simple, clear, and in accordance with the Rules. The husband, on the evidence before me, did not engage with it. This factor attracts very significant weight in favour of the wife.CONCLUSION AS TO THE MAKING OF A COSTS ORDER Having regard to the above factors, especially the fact and terms of the executed consent orders dated 4 March 2022 and their reflection in terms of the wife’s offer made 2 May 2022, when each is compared with the final orders made, coupled with the failures of the husband to explain his reasons for resiling from the compromise and not putting into evidence any of the offers he made, establishes justifying circumstances to warrant an order for costs being made in the wife’s favour for the period subsequent to 7 March 2022 up until conclusion of the February 2024 trial.THE BASIS OF COSTS TO BE PAID As to the costs being ordered on an indemnity basis, the wife submits that the circumstances are of such “an exceptional kind” as expounded in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, that an indemnity costs order is warranted. She contends that such circumstances include that the husband:(a)Resiled from the final terms agreed and signed at the private mediation on 4 March 2022;(b)Refused to accept the wife’s formal offer of settlement dated 11 April 2022;(c)Was wholly unsuccessful in the proceedings from 7 March 2022;(d)Continued the proceedings from 7 March 2022, which put the wife “to undue cost and pressure”;(e)Failed to attend a mediation on 19 February 2024; and(f)Failed to appear at final trial. The husband submitted that his failure to appear at the final hearing “likely resulted in less hearing time and benefited the Wife”. He said an issue with his retainer of his lawyers was relevant to his failure to attend at the mediation and that he had paid half the mediators fees. It is well-settled that when costs are ordered by this Court, such costs are payable on a party and party basis. The Court should not lightly depart from the ordinary rule, and indemnity costs are made only in exceptional cases (Kohan & Kohan (1993) FLC 92-340). It has also been accepted that in proceedings under the Act, where the usual rule is that each party shall bear their owns costs, an order for indemnity costs is even more exceptional than in jurisdictions where the usual rule is that costs follow the event (Mansfield and Ors & Mansfiled and Anor (2019) FLC 93-920 at [7]). The Full Court in Phillips & Hansford (2020) FLC 93-941, helpfully summarises the position as follows:36Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).37In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).

Ratio Decidendi

Legal Principle Established

The Full Court has made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters. I shall refer to such s 117(2A) matters as are relevant and engaged here.CONSIDERATION The wife submitted that the circumstances justifying a costs order arise from a consideration of the parties’ financial circumstances, the conduct of the parties in relation to the proceedings, whether any party has been wholly unsuccessful in the proceedings, and the terms of offers of settlement. I accept the wife’s submission that the husband has the capacity to meet an order for costs. I give little weight to the husband’s submission that the wife “is not in such a substantially inferior position as compared to the Husband that she cannot manage to meet her legal costs”. The husband’s property and resources are superior to those of the wife. This factor supports a costs order in favour of the wife. The wife submitted that the husband:(a)Failed to attend a mediation on 19 February 2024, resulting in the mediation being aborted and she incurring additional wasted costs, including for the attendance of senior counsel and half of the mediators fees;(b)Failed to comply with Order 9 dated 21 February 2024, requiring each party to serve upon the other a final offer of settlement; and (c)Failed to attend the final trial. The husband submitted that many of the allegations in the wife’s costs affidavit were “more of a character attack” on him. The husband submitted that his identified conduct was “not so egregious” to “derail” the proceedings. While I generally accept the thrust of his submission, I give weight in favour of the wife to his failures to attend the February 2024 mediation and his failure in complying the order as to serving an offer of settlement. I accept both the husband’s submissions that he has “had a degree of success” in the litigation and that the wife has not been “wholly successful” (as she contends) in the litigation. The wife sought at trial an adjustment in her favour as to 37.5 per cent of the property of the parties. The husband in his Second Further Amended Response to an Initiating Application filed 2 February 2023 conceded an adjustment to the wife as to 17.5 per cent of the property of the parties. Neither party was wholly successful in prosecuting their respective substantive relief. The husband correctly identifies that the wife was also unsuccessful in the prosecution of her case seeking an adjustment relying upon the principles identified in Kennon v Kennon (1997) FLC 92-575 (“Kennon”) and was unsuccessful in achieving a number of notional addbacks of significant value. These factors, on balance, are neutral, supporting the position established by s 117(1) of the Act. On 7 March 2022, the husband resiled from the parties final signed consent orders achieved at mediation on 4 March 2022. That agreement provided for the husband to pay the wife an adjusting sum of $500,000 and for she to retain her Suburb C property. The orders made 28 February 2024 provided for the husband to pay the wife the sum of $823,201 and for the wife to retain her Suburb C property. The husband did not put into evidence his reasons for resiling from the executed consent terms.