Faraday & Anor and Gear & Anor

[2012] FamCA 513

FAMILY COURT OF AUSTRALIA

FARADAY AND ANOR & GEAR AND ANOR [2012] FamCA 513

FAMILY LAW - COSTS - Circumstances justifying order – where the respondents’ financial position is much superior to that of the applicants – where the respondents were wholly unsuccessful in the portion of proceedings in which costs are being sought – where the applicants had made an offer to settle – orders for the respondents to pay the applicants’ costs as agreed or assessed, from the date that the offer to settle was made

Family Law Act 1975 (Cth) ss 117(2), (2A)

Camaro & Camaro (No 2) [2011] FAMCAFC 223
Penfold v Penfold (1980) 144 CLR 311
Rice & Asplund [1979] FLC 90-725
Z (A Solicitor) & Limousin (2010) FLC 93-433

APPLICANT: Ms Faraday and Ms Hugo

RESPONDENT: Mr Gear and Mr Risk

FILE NUMBER: SYC 1164 of 2011

DATE DELIVERED: 5 July 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: In Chambers

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Kyle Family Lawyers

SOLICITOR FOR THE RESPONDENT: Watts McCray Lawyers

Orders

IT IS ORDERED

1. That within 28 days of agreement or assessment, the respondents pay the applicants’ costs of the proceedings on 20 January 2012, as and from 9 December 2011, as agreed or assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Faraday and Anor & Gear and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1164  of 2011

Ms Faraday and Ms Hugo

Applicants

And

Mr Gear and Mr Risk

Respondents

REASONS FOR JUDGMENT

1. On 10 June 2011 the respondents, Mr Gear and Mr Risk, filed an application seeking, inter alia, a variation of order made by consent on 3 March 2011 relating to the parenting of B (“the child”) born in August 2011. That application was amended by an application filed 24 October 2011.

2. The child’s parents are the applicants, Ms Hugo and Ms Faraday. Mr Gear is the child’s biological father.

3. On 21 May 2012, the applicants filed an Application in a Case seeking a dismissal of the Amended Application filed 24 October 2011 and an order that the respondents pay their costs. The application for dismissal relied on the principle in Rice & Asplund [1979] FLC 90-725.

4. The substantive matter was heard on 20 January 2012 and judgement was delivered on 3 February 2012. the applicants were successful and the application to vary the consent orders was dismissed.

5. The applicants now seek costs of those proceedings.

6. The matter falls to be determined according to the provisions of section 117(2) of the Family Law Act 1975 (Cth) which is set out below:

   117(2)  If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   117(2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a) the financial circumstances of each of the parties to the proceedings;

   (b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g) such other matters as the court considers relevant.

7. These provisions were the subject of consideration by the High Court in Penfold v Penfold (1980) 144 CLR 311:

   As subsec. (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs. 

   Subsection (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 sec. 117(2) in “a clear case”.

   Subsection (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 (1970) 92 W.N. (N.S.W.) 503, at p. 505). 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.

8. In Z (A Solicitor) & Limousin (2010) FLC 93-433 the full Court said:

   We observe that s 117(2) does not mandate that more than one or all of the matters in s 117(2A) must be found to warrant a departure from s 117(1). This was explained by the Full Court in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Anor (2005) 33 Fam LR 123 at paragraph 41 as follows:

   "... Nowhere in subsection (2A) or elsewhere in section 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."

9. In Camaro & Camaro (No 2) [2011] FAMCAFC 223, Coleman J, sitting as the Full Court said:

   “As the high court has made clear in Penfold v Penfold (1980) 144 CLR 311 at 315, the exercise of discretion is neither impelled or constrained by the need to find special or other circumstances or any circumstances of a party”.

10. Dealing with the provisions of Section 117(2), I find that there are circumstances justifying the making of an order for costs in favour of the applicants for the reasons set out below.

11. There is an imbalance between the respective financial circumstances of the parties. The applicants have a combined income of $133,000. They support themselves and two children. They do not have any savings or investments other than their home and they have borrowed $20,000 to fund the proceedings.

12. The respondents have a combined income of $233,532. Mr Risk is employed by a company of which he is the sole shareholder, the value of which he estimates to be $100,000. They depose to bank accounts totalling $10,000; listed shares to the value of $19,500; and an art collection which they value at $110,000. They do not have any dependents. They have no liabilities.

13. I disregard the value of the homes in which the respective parties live and the equity in those homes because I do not regard that equity as available to pay any costs incurred or ordered.

14. The respondents’ financial position is much superior to that of the applicants.

15. The respondents were wholly unsuccessful in the portion of the proceedings determined by me.

16. By letter dated 9 December 2011, the applicants’ solicitor made the following offer:

    “If your clients continue to instruct you to press their defence on the Rice & Asplund issue; and your clients’ defence is unsuccessful; my clients will seek that the costs award against your clients be on an indemnity basis. In my view your clients defence will be unsuccessful on the basis that there has been no change of circumstances at all since the orders were made, let alone any “significant” change as is required before the court will hear a fresh application for parenting orders.

    Offer to settle

    If your client are willing to consent to the dismissal of their application now, my client offer to settle on the basis that each party pay their legal costs incurred to date”.

17. The submissions on behalf of the respondents assert that this letter is not a true offer of compromise in that the respondents would have to abandon the whole of their case. The respondents’ case had two limbs; firstly the application to vary the orders which was the subject of the hearing before me; and secondly, an application to appeal out of time against the consent orders.

18. The settlement offer is silent in relation to the second application. It may have been interpreted by the respondents to apply to both applications but there is no evidence that they sought clarification. In any event, had the respondent withdrawn only the first limb of their application, a day of hearing would have been saved.

19. The respondents rely on their assertion that they were wrongly advised as to the consequences at law of the consent orders and the difficulties which would be encountered if they sought to vary the orders. Whatever may have been the advice they received at the time the orders were entered into, they had engaged their present solicitors in July 2011 and must have been advised of the correct position well before the application was filed on 24 October 2011.

20. The respondents may have a remedy in another place if their advice was inadequate but the consequences of their inadequate legal advice should not be visited on the applicants.

21. The respondents submit that it is inappropriate to consider the application for costs of the first limb of their application when the second limb has not yet been determined. The hearing was discreet and in relation to the Rice & Asplund issue only. If the respondents are successful in relation to the second limb, it in no way detracts from the argument that they were wholly unsuccessful in relation to the first.

22. The respondents should pay the applicants’ costs of the hearing on 20 January 2012 as and from 9 December 2011, being the date when the applicants’ solicitors made the offer to settle.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 5 July 2012.

Associate: 

Date:  5 July 2012