Fazarri and Hsiao (No. 3)
[2018] FamCA 867
•29 October 2018
FAMILY COURT OF AUSTRALIA
| FAZARRI & HSIAO (NO. 3) | [2018] FamCA 867 |
| FAMILY LAW – COSTS – where a property settlement application had been opposed until trial when the respondent sought an adjournment which was refused – where the matter proceeded on an undefended basis – where the applicant now seeks costs – where some costs should be awarded on the basis of wasted time. |
| Family Law Act 1975 (Cth) Family Law Rules (2004) (Cth) Federal Circuit Court Rules (2001) (Cth) |
| Fazarri & Hsaio [2018] FamCA 446 Fazarri & Hsaio (No. 2) [2018] FamCA 447 Limousin v Limousin (Costs) (2007) 38 Fam LR 478 Loomis & ML Lawyer (2016) FLC 93-731 |
| APPLICANT: | Mr Fazarri |
| RESPONDENT: | Ms Hsiao |
| FILE NUMBER: | MLC | 11418 | of | 2016 |
| DATE DELIVERED: | 29 October 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | By way of written Submissions |
SUBMISSIONS RECEIVED FROM
| THE APPLICANT: | Taussig Cherrie Fildes |
| THE RESPONDENT: | In Person |
Orders
That the wife pay the husband’s costs fixed in the sum of $35,000 such sum to be offset against the amount owed by the husband to the wife and paid forthwith.
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 Fazarri & Hsiao (No. 3) 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 MELBOURNE |
FILE NUMBER: MLC 11418 of 2016
| Mr Fazarri |
Applicant
And
| Ms Hsiao |
Respondent
REASONS FOR JUDGMENT
By application contained in submissions filed 1 August 2018, Mr Fazarri (“the husband”) seeks an order for costs against Ms Hsiao (“the wife”).
The application seeks costs of $309,108 which, if granted, would indemnify the husband against the costs that he has incurred with his legal practitioners. In the alternative, the husband seeks that costs be awarded on the scale under the Family Law Rules (2004) (Cth) (“the Family Law Rules”) and in the alternative again, a combination of the relevant scales provided by the Federal Circuit Court Rules (2001) (Cth) up until September 2017 and the Family Law Rules thereafter. In respect of the latter alternative, the basis lies in the fact that the proceedings were commenced in the Federal Circuit Court and continued there until September 2017 when they were transferred to this Court.
For her part, the wife opposes any order being made at all, and in her responding submission filed 14 August 2018, she submitted that a careful examination of the court file would show that there has already been one costs order made and it was inappropriate to make an order for all of the proceedings.
The wife submitted that the likely effect of a costs order had to be seen to be relevant and may override the fact that the particular party against whom the order is sought has been wholly unsuccessful (see Limousin & Limousin(Costs) (2007) 38 FamLR 478 at [61]). It was the wife’s submission that all or any one of the factors in s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”), including offers of settlement may be overridden by the effect of such a costs order. All of that submission stemmed from the wife’s position that there was a great disparity between the parties’ respective financial circumstances. In her submission, that was a factor of great importance and militated against the costs order being made. It is not controversial that the husband is wealthier than the wife.
As part of her submission, the wife noted that she was in receipt of assistance by way of legal aid for family proceedings in the magistrates’ court. In my view, that is irrelevant to the proceedings under the Act but, in any event, it is clear from the documents that she provided, that funding was either terminated or withdrawn.
In addition to the submissions in her response, the wife also relied upon an affidavit filed in August 2018 attached to which was a copy of the LANDATA website printout of the transfer document relating to the property that was the subject of the proceedings. That document was uncontroversial and unnecessary. In addition, the wife attached a copy of a certificate from the Registrar of Births Deaths and Marriages (Victoria) to show that no record could be found of a registered relationship between the wife and the husband. That too is uncontroversial in this case.
All of these matters arise out of orders made on 19 June 2018 in the property proceedings between the husband and the wife. It is unnecessary for me to set out much detail about those proceedings as the relevant material can be found in Fazarri & Hsaio [2018] FamCA 446 and Fazarri & Hsaio (No. 2) [2018] FamCA 447. In respect of the second of those judgments, the explanation was given for an order permitting the husband to proceed on an undefended basis where the wife did not attend the second day of proceedings. The wife has appealed against those orders having filed a Notice of Appeal on 16 July 2018. In respect of the appeal, it was part of the wife’s submission (paragraph 30) that any order for costs should be stayed until the disposition of her appeal against those orders. I reject that. If the cost issue is determined, the wife can consider that as part of the appeal if she chooses.
Albeit that the wife’s submission was something she signed herself, it is comprehensive with extensive references to authority. The husband’s application for costs was drawn by his counsel and attached to that submission was 140 pages of annexures drawn from his solicitor’s records indicating not only offers of settlement as between the husband and the wife over a period of years but also how his costs were incurred.
I have taken all of those matters into account.
The husband also seeks that any order for costs in his favour should be offset against what the Court ordered he pay the wife in the property proceedings. To avoid further proceedings, that is appropriate.
Insofar as I have already alluded to the fact that there is a disparity between the financial circumstances of the husband and wife, some caution has to be added to that statement because the wife failed to provide any financial statement as required by the rules of the Court or indeed an affidavit of her evidence in chief.
The husband submitted that impecuniosity was not determinative of an application for costs (see Loomis & ML Lawyer (2016) FLC 93-731). I agree with that submission. Section 117(2A) of the Act does not prescribe that any one factor as having any more or less weight than the other factors. All matters which form the discretion have to be taken into consideration.
In this case, the husband pointed to the multiple offers that were made to the wife to settle the dispute. He submitted that she had failed to accept offers and all the while, continued to seek an equal division of property in circumstances where “she made no contribution to the husband’s income, earning capacity, property or financial resources” and most importantly, where the marriage lasted only 23 days. There is some controversy about the extent of the relationship and its length but even if the husband’s 23 day observation is one end of the spectrum, it would be hard to say that this relationship was of any great duration in any event and more importantly, as I analysed in the reasons for judgement, the role of the wife was modest.
These proceedings had travelled through the court system with a number of adjournments made at the wife’s request and yet her pursuit of the husband did not alter. In the Federal Circuit Court, it is asserted (and not denied by the wife) that she told the learned Federal Circuit Court judge that she would call “numerous expert witnesses” and that the trial would “likely take more than four days”. It has never been explained by the wife why that was so and the nature of the assets held by the husband were largely uncontroversial. In the reasons for judgement at [88], I found that the wife did not diligently approach the issues concerning the litigation.
There is no doubt that the husband was frustrated. The wife objected to subpoenae issued by him; she alleged failure of the husband to comply with his discovery obligations. The wife refused to cooperate with the husband in engaging a single expert witness and then on the day prior to the trial, filed an application seeking interlocutory orders for recusal that gave rise to the judgment to which I have already referred (Fazarri & Hsaio [2018] FamCA 446). Not all of the responsibility for the recusal application fell on the wife. The reasons indicate that I thought her solicitor’s actions questionable.
Section 117 of the Act provides that in proceedings under the Act, each party shall bear their own costs unless there are circumstances to justify a departure from that principle in which case, if there are circumstances found, the Court shall not make an order unless it has contemplated the matters set out in s117(2A) of the Act. In this case, the husband points to the whole of the day at the first day of trial being taken up by the wife’s recusal application following which, she then applied for the trial to be adjourned and was unsuccessful. It was that latter point that apparently gave rise to her not attending the hearing on the second day and her attitude was conveyed to the Court as to what she intended to do.
Substantially underpinning the application for the husband’s costs is the fact that he made a number of offers to settle the proceedings. Those offers were made on 7 October 2016, 28 December 2017, 19 February 2018 and 27 March 2018. Each of the submissions which were largely uncontroversial about those offers would indicate that had the wife accepted one of them, she might have been better off financially than she is now.
It is therefore the husband’s case that he had endeavoured to resolve the matter in a diligent way but the wife either ignored his offers or rejected them. In the context of the case in which the wife’s transparent claim was one half of the substantial assets of the husband or at least something akin to that, her rejection of those offers is mystifying in circumstances where at the time, she had legal representation. The basis of her claim remains unexplained.
It was submitted by the husband that by way of final outcome, the wife should have taken the offers along the way. Her refusal to do so meant that the husband had to continue to engage in the proceedings in circumstances where it was difficult to get a sense of not so much what the wife was seeking, but why.
The husband submitted that the wife’s approach to the litigation justified an order for all of his costs or in the alternative, costs calculated according to scale. In respect of the former, $161,000 was for solicitor’s fees and $143,000 for counsel. The only other major expense was $4,800 for disbursements.
As was required, the solicitors for the husband provided a copy of their costs agreement. In addition to the costs agreement which indicates that the husband contracted with his solicitors to pay well beyond the scale in the schedule to the Family Law Rules, counsel were engaged to appear for him at various hearings at very high fees. I make no criticism of the husband engaging in those expensive exercises because it was his money, and his prerogative, but the question for the Court is whether it is just to visit those upon the wife. These proceedings were not originally complex, and were commenced in the Federal Circuit Court. As the husband’s submission pointed out, he was upset about the fact that the wife had (effectively) misled the Federal Circuit Court judge in relation to the complexity of the matter such that it was transferred to this Court. Nothing I read indicated any complexity. That issue then guides my discretion in relation to whether or not, if any order for costs is made, whether it should be in excess of the scale.
While costs are intended to compensate a party who is obliged to participate in the proceedings and are not a punishment, I am very mindful of two things. The first is that the starting point in the legislation (s 117 of the Act) is that each party shall bear their own costs. True it is that the Act provides for a departure from that principle if there are justifying circumstances, but it is clear that the philosophical starting point is that each party should engage in the proceedings at their own expense. The second point is that the Court sets a scale which (in its wisdom) considers the appropriate level of fees as between solicitor and client, and is substantially lower than the fees that the husband has contracted to pay. The rules of the Court indicate that if a party wishes to opt out of that system and contract fees beyond the scale, providing they receive the appropriate advice, the Court has no role but to impose those high fees on the wife because the husband chooses to so contract, requires exceptional circumstances. That is if a litigant so contracts, they must understand that even if a costs order is ultimately made in their favour, it is only in the rarest of circumstances that they will recover their losses from the other party.
The indemnity costs issue cannot be determined until such time as the Court determines whether or not an order should be made at all and if so, whether or not indemnity costs should then be applied in circumstances where the Court then knows what the scale costs are.
I am satisfied that the husband has been frustrated and had to engage in processes at expense that were unnecessary having regard to the position that the wife adopted not only in respect of the offers of settlement but the very conduct of the litigation as I have already mentioned. However, he still needed to participate in the proceedings to achieve the outcome that he wanted. The factual circumstances as set out in the judgment to which I have already referred indicate that he transferred the main property in part to the wife and entered into an arrangement operative upon his death to set up a trust for her children from a previous relationship. He needed all of those matters resolved in these proceedings and whilst the offers of settlement could clearly have resolved those problems at an early stage, the wife was resistant to that course. Ultimately, the husband achieved orders that cleared up all matters.
The wife’s approach to the litigation was unsatisfactory. The complaints by the husband to which I have referred in his submission about that are well-founded. Her application for the adjournment was unsuccessful as was her recusal application. The husband had to sit through a wasted day. He should not have the responsibility for those wasted costs.
The quantum of the dispute was clearly something that was discretionary from the point of view of an outcome and the nature of the offers and the amounts involved indicate how wide that discretion is having regard to the fact that the offers were made no doubt on advice. As earlier observed, s 117(2A) factors are matters to be taken into account and no one factor is more important than the other.
I am therefore satisfied that there is a justification for a departure from the principles in s 117 of the Act and in respect of the matters in s 117(2A) of the Act, I am satisfied that the husband is in a much stronger financial position than the wife (notwithstanding the absence of her financial material), her conduct was such that as a litigant, she did not comply with directions and orders and did not diligently undertake what is contemplated in Chapter 1 of the Family Law Rules 2004 to resolve the matter expeditiously. I am satisfied that there are no legal aid considerations here because of the fact that the grant that she received was limited to the magistrates’ court for whatever reason and she is no longer pursuing that legal aid grant. I am satisfied that offers were made that would have enabled her to have been out of the proceedings quickly and more successfully than she now is under the exercise of discretion in the orders that I made and having regard to the fact that the assets in this case were hardly controversial and she had legal advice, a prudent litigant might have rejected the first offer but the offers thereafter must have been hard to resist in the circumstances.
In my view an order for costs should be made but having regard to the fact that I have had the carriage of the proceedings up until it was concluded, I am best able to determine the amount of costs rather than send the issue off to an assessment by a registrar in circumstances where an independent assessment would need to be made as to what costs the husband incurred were reasonable.
For the reasons I have already articulated, there is no basis upon which I could visit the fees that senior counsel for the husband on the wife. There is every reason for me to order the costs incurred by the husband for his junior counsel and having examined the scale, I am satisfied that the appropriate amount of costs allowable for counsel should be $8,300. I have also examined each of the amounts charged by the solicitor. Many of the items are shown as reviewing instructions and reviewing evidence. That means that the solicitor or solicitors, was or were updating their knowledge of what material was already before them and they had previously read. Various emails discussing the case were made between solicitor and client and whilst the husband was undoubtedly content to be charged for all of these items, they are not matters that ought to be visited upon the wife. Similarly, consideration of legal issues and research are not matters which in my view, should be visited on the wife even if the husband is content for his lawyers to take those matters into account. Having regard to those issues, and having examined the various units of time that the husband was charged, I would permit 64 hours at the family law scale.
Having also examined all of the out of pocket expenses incurred, I accept that $4,800 is the appropriate sum.
There is undoubtedly no precise calculation that could be undertaken here because of the number of “units” of time involved and I have not had the opportunity to assess whether it was reasonable for all of those amounts to be taken into account. I am therefore content to exercise my discretion and say that I should err on the side of generosity to the husband having regard to the fact that he made diligent efforts to have correspondence sent to the solicitors for the wife and indeed the wife herself and those letters could not have been sent unless there were instructions and attendances dedicated to that task as distinct from such matters as discovery in the preparation of interlocutory and final affidavits. In my view when all those matters are taken into account, the appropriate amount of costs is $35,000. That sum should be offset against the amount owed by the husband to the wife.
The wife submits that the amount of any order for costs should be stayed pending the appeal. That should only arise if the husband does not make the payment of the capital sum under the orders to the wife. In my view, any further adjustments can be made at or subsequent to any appeal and in my view there is no basis for me to make the order unless there is agreement between the parties.
To the extent that it is necessary for me to say so, for the reasons that I hope I have made clear, I have rejected the husband’s application for indemnity costs. All of the authorities and many to which the wife has herself referred, make it clear that indemnity costs are the exception rather than the rule. Indemnity costs in the true sense mean all of the costs that one litigant incurs are paid by the other. In my view, having regard to the matters about the trust and the husband’s transfer of the property to the wife, he added to the complexity of that issue and therefore made the litigation a bit more interesting. There is nothing I can see about these proceedings to indicate that the conduct of the wife other than in respect of offers of settlement, was exceptional. That is not to say that she ought not be criticised for her approach to the litigation but having regard to the philosophy to which I referred as set out in s 117 of the Act, in my view there is no basis for me to say that all of the costs of the husband should be met by the wife. There will be orders accordingly.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 29 October 2018
Acting Associate:
Date: 29 October 2018
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