Falkner and Candle
[2020] FamCA 246
•16 April 2020
FAMILY COURT OF AUSTRALIA
| FALKNER & CANDLE | [2020] FamCA 246 |
| FAMILY LAW - COSTS – Where application for costs made by the wife – Consideration of applicable principles – Where appropriate that the husband pay the wife’s costs assessed in the sum of $12,500. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 19.18 |
| Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Collins & Collins (1985) FLC 91-603 Dorsey & Mallon [2018] FamCAFC 244 Greedy & Greedy (1982) FLC 91-250 Harris & Dewell and Anor (No.2) [2018] FamCAFC 180 Hawkins & Roe [2012] FamCAFC 77 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC Luadaka & Luadaka (1998) FLC 92-830 Munday v Bowman (1997) FLC 92-784 Parke & the Estate of the Late A Parke (2016) FLC 93‑748 Penfold v Penfold (1980) 144 CLR 311 |
| APPLICANT: | Ms Falkner |
| RESPONDENT: | Mr Candle |
| FILE NUMBER: | PAC | 623 | of | 2018 |
| DATE DELIVERED: | 16 April 2020 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | By way of written submissions last received on 28 February 2020 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Coleman Greig Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Mr Candle |
Orders
That the husband pay the wife’s costs of and incidental to her interim application filed 5 June 2019 assessed in the sum of $12,500 within 28 days from this date.
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 Falkner & Candle 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 PARRAMATTA |
FILE NUMBER: PAC 623 of 2018
| Ms Falkner |
Applicant
And
| Mr Candle |
Respondent
REASONS FOR JUDGMENT
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.
That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They are as follows:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party has legal aid and the terms of any grant of aid;
(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 answers, 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 the present application the wife, the primary applicant in ongoing proceedings for property settlement orders, seeks an order that the husband pay her costs of and incidental to her Application in a Case filed 5 June 2019 that was determined by Reasons for Judgment and orders made 2 July 2019. These Reasons for Judgment assume familiarity with the Court’s Reasons for Judgment delivered on that day.
The orders made on 2 July 2019 were as follows:
(1)The wife Ms Falkner be appointed trustee for sale of the property situate at Town B in the State of New south Wales being the whole of the land identify … and for such purpose the said property shall vest in her and that the wife as trustee do all things necessary and sign all necessary documents to sell the subject property for the best price reasonably obtainable by such method of sale as she may in her discretion determine and that the wife as trustee pay the net proceeds of sale of the said property in the following order and priority:
(a)In payment of agent’s commission, advertising and selling fees and legal costs of sale;
(b)In discharge of any registered mortgage encumbrance secured against the said property;
(c)In payment of the balance then remaining to be held on trust in a controlled monies account by the wife’s solicitors in the joint names of the parties pending further order or agreement between the parties.
(2)The husband vacate the said property not less than 21 days before settlement of the sale of the said property.
(3)The husband be restrained from doing any act or things that is likely to hinder access to the said property, its appropriate presentation for sale and access to the property by the wife as trustee for sale and the selling agent for the purposes of open for inspections or as otherwise necessary.
(4)That the wife have liberty to apply to have this matter restored to the list on short notice in appropriate circumstances by application to the Court in chambers.
(5)Any application for costs by the wife of and incidental to the present application be by way of short written submissions filed and served within 14 days of today’s date.
(6)The proceedings are adjourned for further judicial case management to 9.30am on Thursday, 1 August 2019.
(7)The husband be in attendance in person on that date notwithstanding that he may be legally represented.
(8)In default of any appearance by the husband on the adjourned date directions will be made for the wife’s property application to proceed on an undefended basis.
(9)The wife effect personal service of a sealed copy of these orders on the husband as soon as practicable after they are available on the portal together with a letter informing the husband that in default of his appearance on the adjourned date the wife will seek to have her property application proceed to undefended hearing.
The short background as to the wife’s interim application is comprised in the Reasons for Judgment as follows:
12.The husband presently resides in the property at Town B, that is registered in his name, but the mortgage security over the property is subject to a personal guarantee by the wife, most likely as a consequence of her primary income earning ability through her business. The husband has resided in the property since separation and since that time it has been assumed that he has been responsible for meeting mortgage payments on the property and outgoings, of course, as is his obligation as the legal owner and primary mortgagor.
13.The wife asserts that on two occasions subsequent to separation in May 2018 and September 2018, the husband has defaulted on mortgage payments and the default was only remedied following correspondence sent to the husband’s then solicitors.
14.The wife expresses concern that on 12 April 2019 she received a demand notice for arrears from the mortgagee arising from defaults in mortgage payments by the husband. As at 12 April 2019 the mortgage payments on the property were in default in the sum of $14,047.69.
15.Under the demand notice dated 12 April 2019, the mortgagee informed the wife that in default of arrears being paid by 21 April 2019, they would foreclose on the property and sell it.
16.Subsequently, the mortgagee was informed of the ongoing family proceedings relating to property in this Court. To the wife’s knowledge, for whatever reason, the husband is refusing to pay arrears of mortgage and they continue to accumulate.
17.The wife asserts that as a part of the final orders sought by her, she’s seeking to retain a property at Town D, which is registered in the joint names of the parties. It will be necessary for her to refinance the loan over that property so as to remove the husband’s name from the title if she is successful in obtaining that order.
18.It is axiomatic to say that the impact of any default under the current mortgage may well have an adverse result on her credit rating and her ability to refinance the mortgage over the Town D loan.
19.The wife complains that throughout the period of the litigation the husband has simply delayed and procrastinated such that some 18 months after the commencement of the proceedings, they as yet are not the subject of any trial directions or, indeed, any date for hearing. The wife complains that she has been to significant expense in dealing with the husband’s prevarication in paying her solicitors in terms of correspondence and unnecessary court appearances.
20.The wife’s updating affidavit filed on 1 July 2019 reveals that on 11 June 2019 she received a further demand in relation to arrears under the subject mortgage from the mortgagee, G Pty Limited. The mortgage arrears as at that date had accumulated further to the sum of $21,256.50 with payment being demanded by 16 June 2019, otherwise, recovery action would commence.
As to the wife’s interim application the husband had failed to engage as disclosed in the Reasons for Judgment as follows:
5.The Application in a Case was listed before a registrar on 12 June 2019 following circumstances where in April 2019 the husband’s solicitor filed a Notice of Ceasing to Act.
6.On 12 June 2019 proceedings were before a registrar of this Court and a solicitor appeared with leave on behalf of the husband but that solicitor has not filed a Notice of Address for Service nor formally sought to appear on behalf of the husband in these proceedings.
7.The wife’s Application in a Case was listed before a registrar on that day and it was noted that the husband at that stage had failed to make ongoing mortgage payments in relation to the Town B property. As a consequence, proceedings were listed in the judicial duty list on 18 June 2019.
8.On 18 June 2019 proceedings were before the Court. There was no appearance by or on behalf of the respondent husband and directions were made that the wife’s Application in a Case be listed for interim hearing to 9.30 am on 2 July 2019.
9.The husband was, otherwise, ordered to file and serve a Response to the Application in a Case together with any affidavit sought to be relied upon by him by no later than 28 June 2019. It was further ordered that in default of the respondent complying with the previous order, the wife’s Application in a Case shall proceed to undefended hearing on the adjourned date.
10.The husband has been notified of the listing today and, indeed, the Court’s orders of 18 June 2019 are on the Court portal for his attention.
The wife asserts that the husband’s non engagement in the proceedings in pursuing the relief sought by her has caused her to expend unnecessary costs.
As to the relevant matters to the exercise of the Court’s discretion as to costs:
a)The wife is in employment in the finance industry with a gross income from all sources of about $5,000 per week. The husband’s income circumstances are not known, however, as at 3 June 2019 he held savings in a Westpac bank account totalling over $59,000. Otherwise, the husband and the wife have received significant capital distributions from the proceeds of property since separation with those distributions being about $377,000 to each. Clearly there is a capacity to meet an order for costs.
b)Neither party is in receipt of a grant of Legal Aid.
c)The wife asserts in submissions that the husband’s conduct in non-engagement has resulted in additional costs in pursuing relief sought by her in the interim application. Otherwise, the wife submits that the husband has had a significant history of non-engagement in the proceedings generally. The wife’s interim application was precipitated by the husband’s failure to comply with his primary obligations as mortgagor in relation to the subject property. In response, the husband asserts that he was voluntarily admitted to H Private Hospital in April 2019. He further asserts that he was conveyed by police to J Hospital after a drunken episode sometime in June 2019. He further asserts that he was arrested on 2 July 2019 by police and taken to J Hospital where he was detained overnight and released on the afternoon of 3 July 2019. He proffers no explanation as to why he was represented by a solicitor on 12 June 2019 and that solicitor subsequently filed a Notice of Ceasing to Act. He proffers no explanation as to what were the circumstances on the many days between the specific dates referred to by him.
d)It is not contended by the wife that there was any non-compliance with previous orders of the Court.
e)In circumstances where the wife, by reason of the husband’s non engagement, was wholly successful in the proceedings the only conclusion open to the Court is that the husband was wholly unsuccessful in that he did nothing to oppose the wife’s application.
f)On 9 May 2019 by letter the wife proposed that she would provide to the husband a sum of $30,000 with those funds to be applied by him in satisfaction of the then arrears in mortgage with the balance to be retained by him and with the whole of the payment to be regarded as an interim property distribution to the husband. The husband did not respond. Had he done so the necessity for the wife’s interim application may well have been avoided.
g)There are no other relevant considerations contended by the wife.
In Collins & Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.
The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:
17. With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:
1. Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".
2. Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
(footnotes omitted)
18. The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:
… A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
In Greedy & Greedy (1982) FLC 91-250 and Luadaka & Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.
The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) which states:
Method of calculation of costs
(1)The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (e.g. 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.
It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at [162] that the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.
In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the Court said at [10] that the Court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.
Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93‑748 at [130]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…
The law in relation to indemnity costs is well settled.
As to indemnity costs reference is made to the frequently cited judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and that often repeated statement need not be repeated here. Holden J in Munday v Bowman (1997) FLC 92-784 drew from the decision of Sheppard J the following examples:
(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. …
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud. …
(c)Evidence of particular misconduct causing loss of time to the court and to other parties. …
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. …
(e) An imprudent refusal of an offer to compromise.
It is also important to note that the category of circumstances which enliven the discretion to award indemnity costs are not closed, and thus the circumstances do not need to come precisely within the examples provided.
In Harris & Dewell and Anor (No.2) [2018] FamCAFC 180 the Full Court said:
23.In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24.That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25. The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said 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.”
26. Of course, in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater.
The accepted principles were again the subject of affirmation by Murphy J sitting as the Full Court in Dorsey & Mallon [2018] FamCAFC 244 where his Honour said:
21.There is no doubt that an award of indemnity costs is confined to “exceptional” cases. In my view, that must be all the more so in a Court where the usual position is that each party should bear their own costs. Although referring to the Family Law Rules 2004 (Cth), I seek to repeat in that respect, what was said in Prantage & Prantage:
151.…the Act, the Rules read as a whole, and existing authority each evidence a clear intention that a significant disparity between the level of costs provided for in Schedule 3 and the fees payable by a client to their legal practitioner militates against an award of indemnity costs or, if the circumstances otherwise warrant such an order, operates as a brake on the quantum that might otherwise be awarded.
152.Section 117(1) is important in that respect. Indemnity costs are confined to “an exceedingly rare situation” (Callinan J quoted by Thackray and Ryan JJ at [42]) in jurisdictions where “the usual rule” is that a successful party receives an order for costs (i.e. “costs follow the event”). They might, then, be seen to be more so in this jurisdiction where the “usual rule” is that “each party … shall bear his or her own costs” (s 117(1)). The comments by this Court in Kohan that indemnity costs are “a very great departure” from the “normal standard” should be seen in that context. That, it should be observed, is not a fetter on this Court’s discretion to award costs or indemnity costs if justice so requires it (see Oshlack v Richmond River Council (1998) 193 CLR 72, at 134 (particularly subpar [3]), per Kirby J). Rather it recognises that an order for indemnity costs, has a particular context in this jurisdiction.
153.In this Court, one of the two “seemingly irreconcilable objectives” of awards of costs referred to by Cooper and Merkel JJ in Re Wilcox quoted by Thackray and Ryan JJ can be expressed as “ … protecting access to justice in family law matters by not exposing an unsuccessful litigant in the usual course to an order for costs”. A litigant in this Court must establish that the justice of the case requires an order for costs by reference to (non-exhaustive) statutory considerations before any order for costs is made.
22.Reference has frequently been made in this Court to the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd and that often repeated statement need not be repeated here. I also refer in passing to what was said in Harris & Dewell (No. 2) at [22] – [25]. In those passages, the Full Court sought to emphasise the rarity of indemnity costs orders in the usual course of events.
It is readily apparent that the circumstances giving rise to the present application for costs go nowhere near the threshold required so as to enliven the jurisdiction for an order for indemnity costs.
However, the application was necessary so as to protect the wife’s position as guarantor under the subject to mortgage with the application arising from the husband’s default in his primary obligation as mortgagor. For the reasons discussed above there are circumstances justifying a departure from the general rule as to costs.
The wife asserts that she has incurred costs including counsel’s fees in the total sum of $28,890 in respect to this discrete interim application. In all the circumstances such costs seem excessive particularly in circumstances where the conduct of the matter could well have been handled by an experienced solicitor advocate. Doing the best that can be done in the circumstances, it is appropriate that there be an order that the husband pay the wife’s costs assessed in the sum of $12,500 within 28 days such costs being of and incidental to the Application in a Case filed 5 June 2019 and the present application for costs.
Such order will be made accordingly.
I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 16 April 2020.
Associate:
Date: 16 April 2020
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