Farmer and Panshin

[2013] FCCA 186

FEDERAL CIRCUIT COURT OF AUSTRALIA

FARMER & PANSHIN [2013] FCCA 186

Catchwords:
FAMILY LAW – Competing applications for costs.

Legislation:

Family Law Act 1975, s.117.

Federal Magistrates Court Rules2001, rr.21.02, 21.04.

Arman & Arman [2009] FAMCA 8
Colgate-Palmolive Co. & Cussons Pty Limited (1993) 46 FCR 225
Farmer & Panshin (2013) FMCAfam 188
Kohan (1992) 16 FamLR 245
Limousin (2008) 38 FamLR 478
Yunghanns & Yunghanns (2000) FLC 93-029

Applicant: MS FARMER

Respondent: MS PANSHIN

File Number: SYC 2252 of 2011

Judgment of: Judge Altobelli

Date of Last Submission: 22 April 2013

Delivered at: Sydney

Delivered on: 6 May 2013

REPRESENTATION

Solicitors for the Applicant: Stidwill Solicitors

The Respondent (self-represented)

ORDERS

1. Except as provided for in order 2 below the applicant is to pay the respondent’s costs of these proceedings on a party/party basis, as agreed or as assessed, calculated from 8 July 2011.

2. The respondent is to pay the applicant’s costs reserved on 31 May 2012, 18 June 2012, 8 October 2012, 11 February 2013 and 14 February 2013 on a party/party basis, as agreed or as assessed.

3. Order 3 made by Federal Magistrate Kemp (as he then was) on 14 March 2013 be vacated to the intent that the respondent is free to access any moneys held representing her share of sale proceeds of the [C] property pursuant to orders made 7 March 2013.

IT IS NOTED that publication of this judgment under the pseudonym Farmer & Panshin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

SYC 2252 of 2011

MS FARMER

Applicant

And

MS PANSHIN

Respondent

REASONS FOR COSTS JUDGMENT

Introduction

1. These are reasons for judgment of competing costs applications arising from proceedings between the parties that culminated in final reasons published on 7 March 2013 as (2013) FMCAfam 188. Pursuant to order 4 made on that date the application for costs proceeded by way of written submissions. The applicant claimed costs arising out of five (5) specific and discrete matters arising from the proceedings, and further sought that those costs be assessed in specified amounts. The respondent sought costs for the proceedings generally, and also sought assessment for specific costs. The applicant was continuously represented by her lawyer throughout the proceedings, and the respondent was represented at times by her lawyer.

Background

1. The reasons for judgment published on 7 March 2013 comprehensively deal with matters of background, the procedural history of the matter, the evidence and relevant rulings and findings.  There is no need to repeat those matters.  The respondent has appealed against the orders made on 7 March 2013.  Neither party submitted that this is a reason to postpone dealing with any costs application.  Indeed, it is not. 

Evidence

1. These reasons are based on the six documents listed below which will be treated as exhibits as so indicated:

   a)Exhibit 1: Applicant's Submissions as to Costs filed 28 March 2013

   b)Exhibit 2: Respondent's Application for Costs dated 28 March 2013

   c)Exhibit 3: Respondent's Cost Submission Response to Applicant dated 18 April 2013

   d)Exhibit 4: Applicant's Memorandum of Costs (account from Mr O) dated 19 April 2013

   e)Exhibit 5: Respondent's Further Application in Support of Costs Submissions dated 22 April 2013

   f)Exhibit 6: Respondent's Further Application in respect of Costs dated 22 April 2013.

2. On 29 April 2013, both parties confirmed that the documents referred to above contain the submissions on which they each rely.

Applicable Law

1. A party to proceedings is entitled to make an application for costs under r.21.02 of the Federal Magistrates Court Rules2001 (as amended) (now Federal Circuit Court rules). Rule 21.02 states:

   (1) An application for an order for costs may be made:

   (a) at any stage in a proceeding; or

   (b) within 28 days after a final decree or order is made; or

   (c) within any further time allowed by the Court.

   (2) In making an order for costs in a proceeding, the Court may:

   (a) set the amount of the costs; or

   (b)set the method by which the costs are to be calculated; or

   (c)refer the costs for taxation under Order 62 of the Federal Court Rules or under Order 38 of the Family Law Rules; or

   (d) set a time for payment of the costs, which may be before the proceeding is concluded.

2. Section 117 of the Family Law Act contains relevant provisions in relation to whether, and if so by reference to what factors, costs should be ordered.The starting point expressed in s.117(1) of the Act is that each party should bear his or her own costs, but the general rule is expressed to be subject to subsection (2), and therefore must yield whenever the Court finds that there are circumstances justifying the making of a costs order. There are circumstances in the present matter that do justify making a costs order. Those circumstances include the conduct of the parties to the litigation, and the making of offers.

3. Subsection (2A) then sets out the matters to which the Court must have regard in exercising its discretion in relation to costs:

   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.

4. Whilst the applicant, in her submissions, does not articulate her claim as being one for indemnity costs if the Court were to make the order in the sum sought by her, it would in effect indemnify her for her costs incurred. The authorities in family law cases are very clear that indemnity costs orders will only be made in exceptional circumstances – for example Limousin (2008) 38 FamLR 478; Kohan (1992) 16 FamLR 245; Colgate-Palmolive Co. & Cussons Pty Limited (1993) 46 FCR 225 per Sheppard J; Yunghanns & Yunghanns (2000) FLC 93-029.

5. In a frequently-cited passage in the reasons of Sheppard J in Colgate-Palmolive, his Honour gives examples of the circumstances when an indemnity costs order might be made – for example fraud allegations falsely made or irrelevantly made, misconduct that causes loss of time to the Court and to other parties, proceedings commenced for ulterior motives or in wilful disregard of known facts or clearly-established law, or the making of allegations which ought never to have been made, or the undue prolongation of a case by groundless contentions.

6. In the respondent’s submissions there is more than an element of seeking retribution, and vindication, by making an order for costs.  As Cronin J said in Arman & Arman [2009] FAMCA 8 at 16:

   …costs are not intended as some form of punishment for litigating, but rather to act as a compensation for the party who has had to participate when they probably ought not to have been there.

Overview of Submissions

1. The applicant’s submissions as to costs are carefully articulated to claim costs incurred as a result of five discrete events as opposed to the costs of the proceedings generally.  The costs sought are as follows: 

2. The Applicant claims the following costs, which, with the exception of item 2.8, are set out, together with the relevant Annexures, in the Affidavit of Ms Farmer sworn and filed in these proceedings on 11 March 2013;

2.1 The amount of $1,848, being the Applicant's legal costs for preparation of Affidavit and court attendance on 31 May 2012, due to the Respondent's refusal to instruct the expert valuer, as set out in the Affidavit of Jayne Stidwill sworn 17 May 2012. The Applicant's costs were reserved by the Court on that day.

2.2 The amount of $1,078, being the Applicant's legal costs for preparation of an Affidavit and court attendance on 18 June 2012, necessary to obtain orders compelling the Respondent to permit access to the [C] property for the single expert valuer, as set out in the Affidavit of Jayne Stidwill sworn 18 June 2012. The Applicant's costs were reserved by the Court on that day.

2.3 The amount of $1,540, being the Applicant's costs of preparation and court attendance on 8 October 2012. The Application in a Case filed 19 September 2012 by the Respondent, sought that the interim orders made by the Court be stayed and that the Respondent be permitted to resume occupation of the property at [C], was dismissed. The costs of the Applicant in relation to the Application were reserved by the Court on 8 October 2012.

2.4 The amount of $3,575, being the Applicant's costs of counsel's appearance before the Federal Magistrates Court on 14 February 2013 on Respondent's Application to have the hearing listed for 15 February 2013, adjourned (costs reserved) by the Federal Magistrates Court.

2.5 The amount of $1,540, being the costs charged by the Applicant's (Ms Farmer's) solicitors for work associated with and attendance to instruct counsel on 11 February 2013. The Respondent (Ms Panshin), was the Applicant in her Application seeking to have the final hearing of the matter adjourned. The Court listed the matter at her request and advised the parties accordingly. Ms Panshin, who was the Applicant in that Application, did not attend Court.

1. A common feature of each of these events is that the Court reserved the costs of the applicant.  In relation to costs reserved, rule 21.04 states: 

   If the costs of a motion, application or other proceeding are reserved, the costs reserved follow the event unless the Court otherwise orders.

2. The respondent’s submissions as to costs seem to emphasise two factors: one which is largely defensive in the sense of resisting an order for costs, and other of which is offensive in advancing an order for costs. Thus, defensively, the respondent refers to her poor financial circumstances as a reason for resisting a costs order being made against her. The main reason advanced for making a costs order in the respondent’s favour is because of offers of settlement made. 

Consideration of the Matters Referred to in Section 117(2A)

1. Paragraph (a) refers to the financial circumstances of each of the parties to the proceedings.  Having regard to the discussion of the financial circumstances of each party which is contained in the reasons for judgment of 7 March 2013, the financial circumstances of each party is not a reason to resist making a costs order.  Each party received sale proceeds from the property at [C], as well as retains their own assets. The applicant’s income is a good one. As for the respondent’s financial circumstances, and her contention (for example, at Exhibit 2) that her financial circumstances “are now poor”, the fact is that certain findings were made at para.77 of the reasons for judgment which state:

   I have no idea about the respondent’s true financial circumstances. The only Financial Statement I have is from 2011. The evidence she gave me on 6 July 2012, when compared to the documentary evidence, sends mixed signals. This is discussed in my reasons dated 10 July 2012 eg. paragraphs 20, 22, 23, 32 and 33.

2. In short, paragraph (a) of subsection (2A) is not a reason for not making a costs order against either party.

3. Paragraph (b) does not apply as, to the best of the Court’s knowledge, neither party had assistance by way of Legal Aid.

4. Paragraph (c) appears to be the main basis for the applicant’s claim for costs arising out of the discrete events to which she refers in her written submissions.  The basis of the claim is articulated in the extract from the applicant’s written submission (above).  Despite having the opportunity to do so, the respondent does not provide a response to the discrete issues raised.  Indeed, the five sets of reserved costs for 31 May 2012, 18 June 2012, 8 October 2012, 11 February 2013 and 14 February 2013 arose out of circumstances where the respondent’s conduct directly put the applicant to unnecessary expense, as well as needlessly took up Court time.  Costs were reserved for good reason, and nothing has transpired since those events that would cause Court to reconsider costs following the events in question.

5. But even if, for example, the respondent is successful in seeking an order for costs of the proceedings generally based, for example, on offers made but declined, that does not negate the impact on the applicant, and on the Court, of the respondent’s conduct.  There is no reason, however, to order that these costs reserved be on an indemnity basis.  The circumstances are not sufficiently exceptional to justify this course.

6. Paragraph (d) refers to the failure of a party to comply with previous orders.  This is an alternate basis to the applicant’s contention for costs.  The Court concurs.  A further basis for ordering the respondent to pay the applicant’s costs arising out of those five discrete reserve costs orders is her conduct in failing to comply with orders.  The respondent contends, however, that some of the applicant’s conduct “had the effect of destabilising my conduct of the proceedings” (Exhibit 2, page 2).  There is no basis for this contention.  There is no evidence before the Court, or relevant finding, about the conduct complained of.  For example, a contravention application arising out of the alleged failure to comply with the order for partial property settlement on 22 January 2013 was dismissed.

7. Paragraph (e) refers to whether a party to the proceedings has been wholly unsuccessful.  Neither party submitted that this was relevant, and the Court agrees. 

8. Paragraph (f) refers to “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”.  This is the main basis of the respondent’s contention that the applicant should pay her costs of the proceedings.  There is substance to this contention.  The material filed on behalf of the respondent establishes that a series of offers were made which, with hindsight, could only be described as remarkable offers, but which were declined by the applicant.  Thus, for example, a letter of 8 July 2011 establishes that the respondent offered to the applicant $50,000 cash, and on the basis that the applicant would otherwise retain all of her assets.  This is an extraordinary offer, given that the order of 7 March 2013 only provided to the applicant $50,506.60 together with an unspecified but minimal amount of interest, and otherwise on the basis that she retain all of her assets. 

9. On 4 October 2011, the offer was increased to $75,000, and then on 8 December 2011 it was further increased to $100,000.  That the applicant did not accept these offers is extraordinary.  Moreover, the applicant, knowing of the respondent’s submissions for costs based on offers made, made no attempt to put the offers in a context that might lead to a conclusion that the offers should not be interpreted as they prima facie appear to be articulated.  The highest offer made by the applicant known to the Court seems to be contained in a letter from the applicant’s solicitor to the respondent dated 8 December 2011 in which she indicates willingness to accept $112,500. 

10. The Court accepts, even though it does not have the benefit of submissions from the applicant in this regard, that there may have been, indeed probably were, a number of conditions that pragmatically inform the applicant’s deliberations about offers.  Thus, for example it is quite possible there was some uncertainty at the time of the relevant offers about the value of the property.  Moreover, the applicant probably was concerned about the respondent’s ability to refinance the debt, in order to pay the applicant out which was possibly an issue as regards the last and highest offer.  Giving the applicant the benefit of the doubt, indeed being generous to her in this regard, one might understand some scepticism about the offer.  All of this fades into insignificance, however, when one has regard to the earlier offers, for significantly smaller amounts, and where there can be far less tolerance about reasonable refusal of offers made.  There are very few cases in the Court’s experience where the case for making an order for costs based on offers made is clearer than on the present facts.

11. It is staggering to think that shortly after the matter first came before the Court on 5 July 2011, and well before the conciliation conference on 23 September 2011, an offer was made that is so similar to the final outcome.  The applicant’s refusal to accept the offer contained in the letter of 8 July 2011 justifies an order for costs in the respondent’s favour.  Again, however, there are no exceptional circumstances that would warrant the making of an indemnity costs order.

Outcome

1. It follows from the above that the respondent should pay the applicant’s costs reserved on 31 May 2012, 18 June 2012, 8 October 2012, 11 February 2013 and 14 February 2013. Save that, the applicant should pay the respondent’s costs of the proceeding from 8 July 2011. In each case, the costs should be on a party/party basis. To the extent that either party has sought an order for assessment of costs, that is inappropriate on the facts of this case. It is impossible to quantify the respondent’s costs having regard to Exhibit 5 and in any event her claim seems to be an ambit claim for indemnity costs. The orders for costs should be as agreed, or as assessed, but the complexity of the costs orders strongly contraindicate the Court attempting any assessment of costs by reference to the Federal Circuit Court rules.

2. The present order for costs does not detract, in any way, from orders for costs made in any other Court, including in the Full Court of the Family Court of Australia.  However, the outcome of the costs application warrants, in the Court’s opinion, revisiting the orders made by Federal Magistrate Kemp on 14 March 2013 in which his Honour, in effect, stayed payment to the respondent to the extent of $27,211.  This was to be, in effect, a potential fund out of which to meet any costs order in favour of the applicant.  As it turns out, it is highly likely that the costs order in favour of the respondent will exceed any amount payable by the respondent.

3. In the circumstances, therefore, there can be no longer any justification for preventing the respondent from accessing the fruits of the litigation.  Order 3 made by Federal Magistrate Kemp on 14 March 2013 is therefore vacated with the intent that the respondent is now free to access this money.  There is no rational basis for the applicant continuing to have security for costs when, in hindsight, it may well be the applicant who should have provided security for costs.  To the extent that Federal Magistrate Kemp reserved the applicant’s costs arising out of the application before him on 14 March, the Court further vacate that order.

4. At paragraph (1) of the Court’s reasons for judgment on 7 March 2013 the Court noted that the evidence before it created the impression that the relationship between the applicant and the respondent was a very intense one, and that the intensity of the relationship was matched if not exceeded by the intensity of the separation and subsequent litigation.  This litigation was a tragic waste of public and private resources.  Both the applicant and the respondent allowed emotion to cloud rational judgment. 

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Associate: 

Date:  6 May 2013