Falk & Falk (No 3)
[2024] FedCFamC1F 361
•30 May 2024
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).
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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Falk & Falk has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
These reasons determine an application for costs of proceedings for property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) determined on an undefended basis sought by Ms Falk (“the wife”) as against Mr Falk (“the husband”). She seeks the husband pay her costs incurred from 7 March 2022 on an indemnity basis fixed in the sum of $291,749, or in the alternative, in accordance with Sch 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) fixed in the sum of $87,660, together with the costs of this costs application. The husband seeks for the wife’s Application for costs to be dismissed and for the wife to pay his costs of responding to this application.
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.
The wife bears the onus to establish circumstances which justify departing from the position that each party pay their own costs, for the making of a costs order in her favour. If the wife establishes there are circumstances justifying a costs order, the next consideration is on what basis should costs be paid.
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.
On 2 May 2022 the wife made a formal written offer of settlement to the husband reflecting the terms reached at March 2022 mediation, identifying Div 4.2.2 of the Rules and the principles in Calderbank v Calderbank [1975] 3 AII ER 333, such offer remaining open for acceptance for 14 days. The husband put into evidence at the costs hearing a number of selected letters contending that the wife had failed to discharge her obligations as to disclosure, implicitly submitting that this may have been a factor as to why he resiled from the consent orders as agreed. At the costs hearing his counsel properly conceded that the contents of the letters contained a number of untested assertions and did not comprise a complete set of exchanges between the parties as to the disclosure of documents and information. The husband had the benefit of Kings counsel attending with him at the 2022 mediation. Implicitly, he entered the terms of the executed consent orders with the benefit of advice, being sufficiently appraised or satisfied as to the relevant financial circumstances of the wife at that time. He did not engage in the final trial to test the wife’s asserted disclosure failures.
The husband said in his affidavit that he made a number of offers of settlement to the wife. None of those offers were put into evidence. The wife did not put her offer of settlement made 23 February 2024 made pursuant to the 21 February 2024 orders into evidence. Implicitly, none of those offers would have assisted either of the parties in this costs dispute.
I accept the wife’s submission that the terms of the consent agreement reached at mediation on 4 March 2022, and the terms of her offer of settlement made on 11 April 2022, were more favourable to the husband than the orders made at trial. The relevance and importance of offers of settlement in property adjustment proceedings is self-evident and is specifically recorded and identified in s 117C of the Act. The Full Court in Browne & Green (2002) FLC 93-115 said at [57]:
…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 to be given.
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).
The costs agreements entered by the wife with her solicitors, senior counsel and two junior counsel are exhibited to her affidavit with a schedule of costs particularising each item of costs identified on an indemnity basis.
The wife’s indemnity costs incurred after 4 March 2022 up to trial are $291,750. The indemnity costs incurred by the husband for the same period are in the range of $305,602.
The wife says by way of Exhibit 1, and the husband does not put into issue, that her scale costs incurred after 4 March 2022 are $87,661.
The difference between the wife’s scale costs and indemnity costs incurred after 4 March 2022 is $204,089.
The husband’s submission was that if the Court was to make an order for costs in the wife’s favour, that there was no reason to depart from schedule contained in the Rules. I do not accept that submission. There is a lacuna in his evidence as to the offers of settlement that he made, and as to his reasons for resiling from the executed consent agreement on 7 March 2022, both which caused both parties to expend substantially additional sums on legal fees.
His costs notice of 18 April 2022 anticipated that he would incur a further $300,000 of legal fees to trial. He was additionally made aware that the wife’s costs notice around the same time estimated she would incur a further quantum of $220,000 of legal fees to trial. He was on express notice from that time as to the risk of costs and the range of its likely quantum.
Both parties, either implicitly or expressly, contended that in the event the wife was successful in obtaining an order for costs, the Court ought to fix costs to further avoid litigation between them.
Rule 12.17(a) permits the Court to adopt a course to fix costs, although it is accepted that the fixing of costs is entirely a matter for discretion. Some guidance as to the considerations to be taken into account can be found from Einstein J in Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23 at [9] (“Idoport”) where his Honour considered that:
For present purposes it seems convenient to commence with the recitation of the principles which inform the exercise of the discretion:
i.the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as “the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation” (All ER page 265)];
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16];
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith [2005] FCA 228; (2005) 215 ALR 788];
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22];
v.the gross sum “can only be fixed broadly having regard to the information before the Court,”: Beach Petroleum at 124;
[in Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enables fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that….is what the rule contemplates”.]
vi. nevertheless, the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120;
vii. in terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No. 2) (1995) 57 FCR 119, put the matter as follows, at [16]:
“On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary “fail safe” discount on the cost estimates submitted to the Court: Leary v Leary at 265….”
I have considered the amounts claimed by the wife and the basis for their calculation in comparison the that pursuant to the Rules.
I am not satisfied that the wife has established that a consideration of all of the circumstances of this case secures the threshold to achieve an order for indemnity costs, notwithstanding the husband resiling from the March 2022 mediation compromise and his imprudent refusal of the wife’s subsequent written offer to compromise in the same the terms.
At the costs hearing, the wife conceded that there was an absence in her evidence as to the some of the fee earners who undertook specific items of work recorded in her costs schedules. The wife did not put into evidence her offer of settlement dated 23 February 2024. The wife prosecuted final relief on the extremity of the outer limit of the reasonable range of discretion on the facts of this s 79 case. The wife could not achieve the Kennon finding, or the add backs, as sought, notwithstanding the acceptance of her untested evidence at its highest. The accumulation of these factors tip the balance against the making of an indemnity costs order in favour of the wife.
That said, the husband knew, or ought to have known, with the benefit of highly experienced legal advice, that resiling from the executed consent agreement reached at mediation, and then not accepting the wife’s written offer of compromise, with the wife thereafter receiving a greater percentage of the property of the parties at trial, would likely lead to a costs order against him looming on the horizon. That ought to reflect in the quantum of any costs order. I am mindful of what was identified in Sfakianakis & Sfakianakis (2019) Fam LR 419, that the making of such order as to costs as the court considers just permits the court to fashion an order that is apt in the circumstances of the case, such that a fixed costs quantum, other than party and party costs or indemnity costs, may be appropriate in the circumstances of this case. I am satisfied, taking into account the factors identified in both Idoport and Sfakianakis that it is appropriate to fix costs at a sum greater than in accordance with Sch 3 of the Rules and less than an indemnity amount, and there is sufficient evidence to do so grounded from the basis of their calculation so as to make an assessment and order that is just.
In the circumstances, I am satisfied that it is just to fix the costs of the wife in the substantive proceedings from 7 March 2022 up to the February 2024 trial in the sum of $170,000, to be paid by the husband. This is in the vicinity of 58 per cent of her costs incurred on an indemnity basis, and in the range of $83,000 greater than that incurred on the basis of Sch 3 of the Rules.
COSTS OF THE COSTS APPLICATION
Both parties sought for the other to pay the costs of this costs application. The wife was successful in achieving an order for costs in her favour. The husband unsuccessfully sought for the application to be dismissed. He did not put into evidence any offer or proposal to compromise the costs application. His failure to pursue such prudent course, coupled with the success of the wife achieving an order for costs, generates satisfaction that circumstances exist to justify an order for the husband to pay the wife’s costs of this costs application.
The husband has incurred costs of the costs application in the sum of $8,500 and the wife in the sum of $9,000. The wife did not articulate any particulars as to how this amount was calculated. In all of the circumstances, I find that an order requiring the husband to pay the wife’s costs of this costs application fixed in the sum of $8,500, being reflective of that incurred by him, is just.
CONCLUSION
The husband is therefore required to pay the costs of the wife of the substantive proceedings in the sum of $170,000 and of the costs application in the sum of $8,500, being a total of $178,500. Absent submission to the contrary I am satisfied that a requirement that the sum be paid within 28 days, being a usual period to pay costs, is reasonable.
On that basis, I make the orders as set out at the forefront of these reasons.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 30 May 2024
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