Farro and Goff & Ors
[2020] FamCA 300
•30 April 2020
FAMILY COURT OF AUSTRALIA
| FARRO & GOFF AND ORS | [2020] FamCA 300 |
| FAMILY LAW – COSTS – Where application for costs made by the former fifth and sixth respondents who, on their application, have now been removed as parties to the proceedings – Consideration of applicable principles – Where order for costs on a party/party basis. |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) rr 19.03, 19.08(3), 19.18(1) |
| 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 Farro & Goff and Ors [2019] FamCA 959 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 23 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 Farro |
| FIRST RESPONDENT: | Ms Goff |
| SECOND RESPONDENT: | Mr Cabler as Trustee in Bankruptcy of Ms Goff |
| THIRD RESPONDENT: | B Pty Ltd (ABN …) |
| FOURTH RESPONDENT: | Mr C trading as 'C Firm' |
| FIFTH RESPONDENT: | Mr D |
| SIXTH RESPONDENT: | E Pty Ltd trading as 'F Business' (ABN …) |
| FILE NUMBER: | PAC | 4297 | of | 2013 |
| DATE DELIVERED: | 30 April 2020 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | By way of written submissions last received on 30 March 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Coleman SC |
| SOLICITOR FOR THE APPLICANT: | Malcolm McDonald & Co |
SOLICITOR FOR THE FIRST RESPONDENT: | No appearance |
| SOLICITOR FOR THE SECOND RESPONDENT: | No appearance |
SOLICITOR FOR THE THIRD RESPONDENT: | No appearance |
| SOLICITOR FOR THE FOURTH RESPONDENT: | Mullane & Lindsay Solicitors |
COUNSEL FOR THE FIFTH RESPONDENT: | Ms Eldershaw |
SOLICITOR FOR THE FIFTH RESPONDENT: | Colin Biggers & Paisley |
| COUNSEL FOR THE SIXTH RESPONDENT: | Ms Eldershaw |
SOLICITOR FOR THE SIXTH RESPONDENT: | Colin Biggers & Paisley |
Orders
That the applicant pay the fifth and sixth respondents’ costs of and incidental to these proceedings on a party/party basis as agreed within one month of this order or otherwise as assessed with such costs to be paid within one month of that assessment.
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 Farro & Goff 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 4297 of 2013
| Ms Farro |
Applicant
And
| Ms Goff |
First Respondent
And
| Mr Cabler as Trustee in Bankruptcy of Ms Goff |
Second Respondent
And
| B Pty Ltd (ABN …) |
Third Respondent
And
| Mr C trading as 'C Firm' |
Fourth Respondent
And
| Mr D |
Fifth Respondent
And
| E Pty Ltd trading as 'F Business' (ABN ...) |
Sixth Respondent
REASONS FOR JUDGMENT
The application for determination is an application for costs made by the former fifth and sixth respondents (“the respondents”) who on 12 December 2019 were removed from these proceedings as parties: Farro & Goff and Ors [2019] FamCA 959.
In summary, the fourth, fifth and sixth respondents had been added to the proceedings by the applicant who sought relief against them by way of damages for their role in allegedly enabling the first respondent to fraudulently appropriate her identity, give effect to various property purchases and the establishment of the finance facilities jointly in the names of the applicant and first respondent without the applicant’s knowledge or permission.
The respondents sought to be removed as parties to the proceedings arguing that there were two separate and distinct causes of action arising from the applicant’s case and that the damages claim against them needed to be determined before the s 90SM property proceedings between the primary applicant and primary respondent’s Trustee in Bankruptcy.
On 12 December 2019 the Court delivered judgment (Farro & Goff and Ors [2019] FamCA 959) and made orders removing the fourth, fifth and sixth respondents as parties to the proceedings having determined that there was no single justiciable controversy in this matter such as would require the engagement of the fifth and sixth respondents. An order was also made on this date that any application for costs arising from this determination be made by way of written submissions filed and served within one month from the date the order was made with any submissions in response to be filed and served within 14 days thereafter.
On 6 February 2020 the respondents filed submissions as to costs sought against the applicant of and incidental to their successful application to be removed as parties to the proceedings. They seek costs on an indemnity basis in the sum of $28,318.70. The respondents also rely on an affidavit filed on 6 February 2020 by special counsel acting for them.
On 30 March 2020 the applicant filed submissions opposing the application for costs made by the respondents. The applicant also relied on her affidavit filed 25 March 2020 to support her opposition to the making of a costs order.
Costs
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 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”…
Indemnity Costs
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 provisions of Rule 19.08(3) provide:
Order for costs
(1)A party may apply for an order that another person pay costs.
(2)An application for costs may be made:
(a)at any stage during a case; or
(b)by filing an Application in a Case within 28 days after the final order is made.
(3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
The obligation imposed by the rule is to “inform” the Court if a party is bound by a costs agreement and, if so, to “inform” the Court of “the terms of the costs agreement”. There is no obligation cast by the rule to put into evidence a copy of the relevant costs agreement, although in practice that is very frequently the means by which the Court is informed of its relevant terms. Regrettably, no details of any costs agreement have been forthcoming and so the question of indemnity costs is not enlivened.
The Parties’ Contentions: the Respondents
The respondents adduce no evidence as to their financial circumstances contending that given their removal from the proceedings “do not wish for the applicant to be appraised of this information”.
The respondents contend that the applicant’s reliance on a Financial Statement filed in 2013 should lead the Court to make an inference that had she filed current and reliable evidence of her financial circumstances it would not assist her case including the probable application for costs to be made by a successful party. The respondents also argue that the applicant’s retention of senior and junior counsel for the hearing should cause the Court to wonder at her financial position.
None of the parties were in receipt of legal aid.
The respondents contend that the applicant’s conduct in joining them to the proceedings in circumstances where on her own evidence, she could not afford to litigate in two separate jurisdictions, supports the making of an order for indemnity costs. They contend that this demonstrates that the applicant joined them knowing that the Family Court was not the proper forum but did so with the motivation of limiting legal fees, without regard to the improper cost and inconvenience to the fifth and sixth respondents.
The proceedings were not necessitated by a failure of a party to comply with previous orders of the Court.
The respondents were wholly successful in their application. The submitted that given they are strangers to the de facto relationship and were brought into the proceedings five years after the family law proceedings were commenced between the applicant and first respondent, this factor should weigh heavily in the determination of costs.
The respondents rely on correspondence sent from their solicitors to the applicant’s solicitors in August 2019 which contained an offer to compromise and have each party bear their own costs if the applicant were to consent to a position that they be withdrawn from the proceedings.
Finally, the respondents contend that a costs order should be considered in pursuit of a policy of deterrence, to reflect the resourcing strains on the family law system. They contend that expanding the Court’s workload with applications of this nature “adds to the burden on the public purse and on the many other litigants and their children who genuinely need to access the specialist services of the Family Court”.
The Parties’ Contentions: The Applicant
The applicant took issue with a number of contentions made by the respondents and the lack of evidentiary basis to the assertions made as to her financial position and conduct.
The applicant contends that she is in a dire financial position and could not meet an order for costs made against her. She asserts having no assets or income available to her beyond which she may receive in property settlement. She asserts that her prior employment as a mental health nurse was terminated this year due to health issues she experienced in the past and as such she is currently unemployed with no certainty as to future employment prospect. The applicant asserts that she is currently admitted fulltime in hospital under specialist care due to her medical condition.
The applicant contends that the timing of the offer of compromise made on 7 August 2019 for a hearing commencing 12 August 2019 is relevant to the question of weight that should be attached to this consideration. The applicant contends that at the stage the offer was made, a large portion of the preparation had already been undertaken and costs incurred but acknowledged that additional costs were incurred in appearing at the interim hearing.
As contended by the applicant, the offer to settle does not comply with rule 19.03 of the Rules which provides:
Duty to inform about costs
(1)If an offer to settle is made during a property case, the lawyer for each party must tell the party:
(a)the party's actual costs, both paid and owing, up to the date of the offer to settle; and
(b)the estimated future costs to complete the case;
to enable the party to estimate the amount the party will receive if the case is settled in accordance with the offer to settle, after taking into account costs.
The applicant contends that, overall, it is relevant that an order for costs would severely prejudice her continuing in her application for final relief. She contends that as she will not be able to meet the order for costs, it would expose her to an application for enforcement or the issue of a bankruptcy notice which would “lead to an inevitable complication of these proceedings which really do need to come to an end for all parties involved”.
Conclusion
For the reasons discussed above the issue of an order for indemnity costs in the sum sought by the respondents is not enlivened.
Given that the respondents were strangers to the primary s 90SM application drawn into the proceedings by the applicant and in circumstances where they have been wholly successful in their application for removal as parties, there are clearly circumstances justifying the departure from the usual rule as to costs and the applicant should bear some responsibility for the costs incurred by the respondents.
There will be an order that the applicant pay the respondents’ costs of and incidental to the proceedings on a party/party basis as agreed within one month of such order or as assessed and paid within one month of that assessment.
I certify that the preceding thirty nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 30 April 2020.
Associate:
Date: 30 April 2020
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