Filmer and Filmer (No 2)

FAMILY COURT OF AUSTRALIA

FILMER & FILMER (NO 2)

[2013] FamCA 809

FAMILY LAW – COSTS – application for costs by the wife – whether the circumstances justify the making of a costs order – consideration of section 117(2A) factors – consideration of whether an order for indemnity costs is appropriate – orders that the husband pay the wife’s costs of the relevant application in a case on a party and party basis.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) r 19.08; 19.18; 19.19; 19.34; Schedule 3; Schedule 4

Penfold v Penfold [1980] FLC 90-800
Tuck & Tuck [1981] FLC 91-021
Rouse & Rouse [1981] FLC 91-073
Kelly & Kelly (No 2) [1981] FLC 91-108
Greedy & Greedy [1982] FLC 91-250
Oriolo & Oriolo [1985] FLC 91-653
Briese & Briese [1986] FLC 91-713
Nemeth & Nemeth [1987] FLC 91-844
Latoudis v Casey (1990) 170 CLR 534
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225
Kohan & Kohan [1993] FLC 92-340
I & I (No 2) [1993] FLC 92-625
Telfer and Telfer [1996] FLC 92-688
Munday & Bowman [1997] FLC 92-784
NMFM Property Ltd v Citibank Ltd (No 11) (2001) 187 ALR 654
Browne & Green [2002] FLC 93-115
Fitzgerald (as child representative for A (Legal Aid Commission (Tas))) v Fish (2005) 33 Fam LR 123
LGM & CAM (Contempt) (No 2) [2008] FLC 93-355
Donaghey & Donaghey (costs) (2012) 47 Fam LR 306
Prantage & Prantage [2013] FamCAFC 105

APPLICANT:

Ms Filmer

RESPONDENT:

Mr Filmer

FILE NUMBER:

ADC

3244

2010

DATE DELIVERED:

21 October 2013

PLACE DELIVERED:

Adelaide

PLACE HEARD:

Adelaide

JUDGMENT OF:

Dawe J

HEARING DATE:

10 September 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Kari

SOLICITOR FOR THE APPLICANT:

David Burrell & Co

COUNSEL FOR THE RESPONDENT:

Mr McQuade

SOLICITOR FOR THE RESPONDENT:

Howe Martin & Associates

Orders

The husband pay the wife’s costs of the Application in a Case filed on 5 July 2012 on a party and party basis.
For the purpose of order (1) hereof the costs be determined by agreement between the parties within twenty-one [21] days or failing agreement, as assessed by a Registrar pursuant to Chapter 19 of the Family Law Rules 2004 (Cth).
The question of the costs of both parties of the wife’s Application in a Case filed on 4 September 2012 is reserved to the date of the final hearing of these proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Filmer & Filmer (No 2) 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 ADELAIDE

FILE NUMBER: ADC 3244 of 2010

Ms Filmer

Applicant

And

Mr Filmer

Respondent

REASONS FOR JUDGMENT

Introduction

This is an application by Ms Filmer (“the wife”) for a costs order against Mr Filmer (“the husband”) arising out of the proceedings initiated by an Application in a Case filed by the respondent husband on 5 July 2012 (Document 18). That application, and the wife’s response to the same, was determined by judgment on 1 May 2013 (see generally [2013] FamCA 279).
The wife contends that any costs order I make against the husband ought to be determined on an indemnity basis. Counsel for the wife tendered a document at the hearing of the costs application entitled “[FILMER] – SCHEDULE OF COSTS – SPOUSAL MAINTENANCE APPLICATION” which sets out the costs the wife incurred throughout the proceedings arising out of the husband’s Application in a Case. The total amount, after certain revisions made on the day, is $21,430.63.
The husband opposes the wife’s application for costs.

Background and Procedural history

The applicant wife was born in 1958 and is now aged 55. She describes her occupation as “home duties.”
The respondent husband was born in 1955 and is now aged 57. He is an accountant, conveyancer and financial planner.
The parties were married in 1981 and separated in April 2010. There are three children of the marriage, all of whom are now adults.
Proceedings in this Court were first commenced when the applicant wife filed an Initiating Application on 26 August 2010. The respondent husband filed a response to the wife’s Initiating Application on 9 September 2010. The parties filed a joint Notice of Discontinuance on 7 February 2011.
The applicant wife filed a fresh Initiating Application on 26 May 2011. That application sought orders for spousal maintenance on both an interim and final basis.
The respondent husband filed a response to the wife’s second Initiating Application on 28 August 2011.
I certified Consent Orders relating to interim spousal maintenance on 21 December 2011 as follows:
(1)Until further order the husband shall pay spousal maintenance for the wife as follows:
(a)the sum of THREE THOUSAND DOLLARS [$3,000.00] on or before 31 January 2012;
(b)the sum of ONE THOUSAND DOLLARS [$1,000.00]      per week with the first payment to be made on 23 December 2011;
(c)the following accounts as they fall due:
(i)     the wife’s telephone;
(ii)    all rates and taxes and emergency services levy on the former matrimonial home;
(iii)   house and contents insurance in relation to the former matrimonial home;
(iv)    registration and insurance for the wife’s motor vehicle;
(v)     the wife’s health insurance at its present cover;
(vi)    ambulance insurance cover for the wife;
(vii) electricity and gas accounts.
(2)The wife’s cost of and incidental to today’s hearing be reserved to the trial Judge.
The respondent husband filed an Application in a Case relevant to the costs sought on 5 July 2012. The application was supported by a Financial Statement and an affidavit. The application sought the following orders:
(1)That the Order for spousal maintenance on 21 December 2011 be discharged.
(2)That, in the alternative, the Order be varied to such other sum as this Honourable Court deems just and equitable.
(3)That this Application be listed for hearing at the earliest opportunity.
(4)For such further or other orders as this Honourable Court deems just and equitable.

The applicant wife responded to the Application in a Case of the husband on 24 August 2012. The response was also supported by a Financial Statement and an affidavit. The response sought the following orders:
(1)That the husband’s Application filed on 05/07/2012 be dismissed.
(2)That the Order for spousal maintenance made in this Honourable Court for the wife on 21/12/2011 be varied to provide that the husband pay or cause to be paid to the wife either:
(a)By substituting the figure of “$1,500” for the figure of “$1,000”; or
(b)By substituting the figure of “$1,250” for the figure of “$1,000” with the husband to forthwith pay or organise and pay the reasonable costs of necessary repairs and maintenance to the former matrimonial home.
(3)That the husband pay the wife’s costs of and incidental to this application;
(4)For such further or other Orders as are just and equitable.

The parties appeared before me on 28 August 2012, at which point consideration of the Application in a Case was adjourned to 3 December 2012. The parties were given leave to file and serve any further affidavit material upon which they intended to rely by no later than 26 November 2012 (see generally [2012] FamCA 783).
The wife filed an Application in a Case on 4 September 2012. The application was supported by an affidavit. That application sought, inter alia, the enforcement of allegedly outstanding payments of spousal maintenance. The application also sought orders requiring the husband to pay (or reimburse the wife for paying) certain expenses connected to the former matrimonial home.
The parties appeared before me on 14 September 2012 for consideration of the wife’s Application in a Case.
The wife’s Application in a Case was dismissed on 14 September 2012 (see generally [2012] FamCA 813). That dismissal was necessary, inter alia, because the wife had failed to specify the kind of enforcement she was seeking as required by r 20.05 Family Law Rules 2005 (Cth).
The wife filed an Amended Response to the husband’s Application in a Case on 27 November 2012. The Amended Response was supported by an affidavit. The Amended Response sought the following orders:
1.That the husband’s Application filed on 05/07/2012 be dismissed.
2.That the order for spousal maintenance made in this Honourable Court for the wife on 21/12/2011 be varied to provide that the husband pay or cause to be paid to the wife … the sum of $1,500 per week in circumstances where the wife is now solely responsible for day-to-day, utility and other expenses associated with the former matrimonial home that the husband was previously ordered to pay.
…
3.That by way of enforcement (pursuant to Rule 20.08 of the Family Law Rules 2004) and as a consequence of the husband’s continuing breach of the Orders made by this Honourable Court on 21/12/2011 and 28/08/2012:-
3.1The husband do all such acts, matters and things and sign all such necessary documents to appoint the wife as his Attorney for the purposes of the sale of the following assets:-
3.1.1The property situate at Unit …/… [B Street, Town M] in the State of South Australia (“the [Town M] property”);
3.1.2All of the contents of the said [Town M] property;
3.1.3The husband’s … BMW motor vehicle;
3.1.4The husband’s interest in a property purchased in the “[GG]” development in Thailand;
3.1.5Any and all shares held with [D Company] by the husband or any of the entities in which the husband has an interest;
3.1.6The apartment situate at Apartment …, … Apartments, [E Street, Suburb F] (“The [Suburb F] Apartment”);
3.1.7The husband’s interest in the [H Sport Team].
3.2That in the alternative to 2.1.6 that the husband be restrained and an injunction be granted restraining him from causing any further funds from whatsoever source being paid into the [H Sport Team] venture/enterprise.
3.3That the net proceeds of the sale of the above-listed assets be distributed as follows:-
3.3.1Firstly, such as sum as is deemed appropriate by this Honourable Court to the wife in reimbursement of and to meet and defray the husband’s liability for the payments previously ordered by this Honourable Court or which have not been paid or payments which may be ordered in the future;
3.3.2Secondly, that the balance be paid into an interest-bearing account in the name of the husband’s solicitors and the wife’s solicitors and that same be used to meet and defray the husband’s liability for the payments ordered by this Honourable Court by the husband to the wife;
3.4That all of the payments due to the Husband or any of his entities from [J Company] including but not limited to profit distributions or dividends (“collectively the [J Company] income”) be garnisheed and that the husband be restrained and an injunction be granted restraining the husband from expending, disbursing or transferring the said [J Company] income without the express prior written consent of the wife.
4.That the husband and the wife in their capacities as directors of [Filmer & Filmer] Pty Ltd ATF the [Filmer & Filmer] Pty Ltd Superannuation Fund (“the Super Fund”) do all such acts, matters and things and sign all documents to cause the sale of an asset of the Super Fund, namely the land and building premises at … [L Street, Suburb K] and that the husband be restrained and an injunction be granted restraining the husband from drawing any funds from the said Fund pending Orders for final settlement of property between the parties.
2.5. That the husband pay the wife’s costs of and incidental to this Application on an indemnity basis.

The husband filed an affidavit on 29 November 2012. The affidavit appears to have been prepared prior to the husband’s receipt of the wife’s Amended Response to his Application in a Case.
The parties appeared before me on 3 December 2012. The hearing of both live Applications in a Case was adjourned to 11 December 2012. The parties were ordered to file updated Financial Statements by 6 December 2012. During the hearing, the husband sought leave to tender an affidavit responding to some of the matters raised in the wife’s Amended Response to the husband’s Application in a Case and the affidavit filed in support of the same. That leave was granted.
The husband filed a further affidavit and an updated Financial Statement on 6 December 2012. The wife also filed an updated Financial Statement on 6 December 2012.
The matter was heard before me on 11 December 2012. I reserved my judgment at the conclusion of the hearing.
I delivered my judgment on 1 May 2013 (see generally [2013] FamCA 279). The orders made were:
(1)Paragraphs 1(b) and (c) of the Consent Order of 21 December 2011 are discharged.
(2)The husband shall pay spousal maintenance for the wife in the sum of ONE THOUSAND TWO HUNDRED AND FIFTY DOLLARS [$1,250.00] per week commencing and backdated to 1 January 2013.
(3)Further consideration of the enforcement orders sought by the wife in paragraphs 3 and 4 of the amended Response filed on 27 November 2012 is adjourned to the final hearing of the proceedings.
(4)The Application in a Case filed by the husband on 5 July 2012 is dismissed.
(5)The question of costs is reserved to a date to be fixed should the parties be unable to reach agreement.

An affidavit of the wife’s solicitor was filed on 28 May 2013. The deponent states that she has “been instructed by the wife to seek that the matter be listed to deal with the reserved question of costs in accordance with paragraph 5 of the orders” made on 1 May 2013. The affidavit also annexes a schedule of costs incurred by the wife (Annexure “C”), and correspondence between the parties’ solicitors following the 1 May 2013 judgment (Annexures “B” and “D”).
The husband filed an affidavit in response to the wife’s affidavit filed 28 May 2013 on 29 August 2013.
The wife filed an affidavit in response to the husband’s affidavit filed 29 August 2013 on 4 September 2013.
The wife’s application for costs was heard by me on 10 September 2013. I reserved my judgment after the hearing.

The Law

The general rule in proceedings under the Family Law Act 1975 (Cth) (“the Act”) is that each party is to bear their own costs (s 117(1) of the Act).
Subsections 117(2)–(2A) of the Act provide an exception to that general rule. Those subsections provide:
(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.”
(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;
(g)such other matters as the court considers relevant.

Subsection 117(4) and (5) concern the costs of Independent Children’s Lawyers and interveners and as such are not relevant in this matter.
The question to be determined is “whether the overall circumstances justify the making of an order for costs” per Nicholson CJ, Ellis and Buckley JJ in I & I (No 2) [1993] FLC 92-625 at 82,277 (recently cited with approval by Thackray and Ryan JJ in Prantage & Prantage [2013] FamCAFC 105 at [112]).
There is nothing in the text of s 117(2A) that prevents “any factor being the sole foundation for costs” (Kay, Warnick and Bolland JJ in Fitzgerald (as child representative for A (Legal Aid Commission (Tas))) v Fish (2005) 33 Fam LR 123 at 130).
Rule 19.18 of the Family Law Rules 2004 (Cth) provides the different bases upon which I may make an order for costs:
19.18 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a)of a specified amount;
(b)as assessed on a particular basis (eg 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.

Rule 19.34 provides the assessment principles that are applicable if an order for costs is made that requires a Registrar of this Court to conduct an assessment hearing to determine the quantum of a costs order on a given basis. That rule provides:
19.34 Assessment principles
(1)A Registrar must now allow costs that, in the opinion of the Registrar:
(a)are not reasonable necessary for the attainment of justice; and
(b)are not proportionate to the issues in the case.
(2) If the court has ordered costs on an indemnity basis, the Registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to, among other things:
(a) the scale of costs in Schedule 3;
(b)any costs agreement between the party to whom the costs are payable and the party’s lawyer; and
(c) charges ordinarily payable by a client to a lawyer for the work.
(3)When assessing costs as between party and party, a Registrar must not allow:
(a)costs incurred because of improper, unnecessary or unreasonable conduct by a party or a party’s lawyer;
(b)costs for work (in type or amount that was not reasonable required to be done for the case; or
(c)unusual expenses.

Consideration of the s 117(2) factors

The parties’ affidavits and oral submissions concerning the wife’s applications for costs centred on the factors contained in s 117(2A).

117(2A)(a) – Financial circumstances of the parties

The joint judgment of Kay, Coleman and Warnick JJ in the Full Court of the Family Court of Australia decision of Browne & Green [2002] FLC 93-115 noted the following at 89,157:
Section 97(3) of the Family Law Act requires that in proceedings under that Act the Court shall proceed without undue formality and shall endeavour to ensure that the proceedings are not protracted. An inquiry under s 117(2A) (a) where the financial circumstances of the parties may be relevant is an inquiry to enable the Court to have some concept of the relative financial positions of the parties. It is not a search for minutiae nor is it to be seen as an appropriate exercise to conduct inconsequential arguments over the value of each party’s assets.
The joint judgment continues at 89,158:
What the Court needs to ascertain is a broad overview of the financial circumstances of the parties if it does not already have that broad overview. The costs application is not the time for conducting a wholesale examination into every aspect of the parties’ financial circumstances. There may be cases, of course, in which it is critical to examine a capacity to meet a costs order but this was not such a case. It was sufficient, as we have already indicated that the Court had a broad comparison of the parties’ financial positions available to it.

Justice Murphy noted in his judgment in Donaghey & Donaghey (costs) (2012) 47 Fam LR 306 at 312 that “modest, or even poor, financial circumstances, is not determinative of the issue.”
With those principles in mind, I turn first to the wife’s financial circumstances. The wife’s counsel submitted that they were parlous. The wife is said to be totally reliant on the weekly spousal maintenance payments of the husband to meet her everyday living expenses. In addition, she is said to be in debt to her solicitors in the amount of approximately $38,000. Her solicitors have intimated to her that that debt will soon be called upon. I accept those submissions. The husband’s counsel did not dispute the fact that the wife’s financial circumstances were as the wife’s counsel said they were.
The husband’s financial circumstances require a more nuanced consideration. The husband’s affidavit filed on 29 August 2013 speaks of numerous matters that are pertinent to this issue:
a)The husband is anticipating a $12,000 bill from his lawyers covering the period of 23 August 2012 through to the date of the swearing of the affidavit on 29 August 2013;
b)With reference to various documents filed earlier in these proceedings; the husband is said to have no capacity to meet an order for costs.
New information concerning the husband’s financial circumstances after the hearing of the spousal maintenance application in December 2012 is contained at paragraphs [23] to [27] of the husband’s affidavit filed on 29 August 201. The husband’s debt to the National Australia Bank is now said to comprise “$1.7M at 5.38% per annum, and $250,000 at 16.75% per annum which results in interest payments of approximately $11,000 per month.”
The husband further states that the National Australia Bank has advised him that “the schedule balance of the loan account debt (after accounting for scheduled but unmade repayments) is currently $750,000.” The husband goes on to estimate that:
The National Australia Bank values (for their purposes) the remaining properties (…) over which it holds security at a total of $1,200,000 as opposed to the current indebtedness of $1,950,000.
The husband’s affidavit includes an annexed “schedule … as to the available income and outgoings for the last three financial years from all sources.” The schedule was prepared by the husband. No source documentation is included.
Counsel for the wife, Ms Kari, did not seek to examine in detail the material advanced by the husband concerning his current financial circumstances as contained in the affidavit filed 29 August 2013. Indeed, as noted in the wife’s affidavit filed 4 September 2013, the wife would have no way of knowing if the figures employed in the husband’s schedule are accurate as the source documents have not been provided by the husband
Instead of directly attacking the material advanced by the husband, the wife chose to highlight the “discrepancies” and “several serious non-disclosures of the husband throughout these proceedings” as proof that “his previously filed Affidavits are not reliable” and, further, that she does “not accept that the husband does not have the capacity to meet an order for Costs.”
In her oral submissions, Ms Kari argued that the fact that the husband’s application to dismiss the spousal maintenance order alone enlivens the capacity to make a costs order as sought by the husband. She further argued that the Court cannot be satisfied or persuaded that the husband does not have the capacity to meet any orders for costs that may be made.
I do not, at this stage, agree with Ms Kari’s submission that, in effect, the “discrepancies” and “several serious non-disclosures of the husband throughout these proceedings” allow me to completely disregard any material that the husband puts to me about his financial circumstances into the future.
As I noted in my judgment handed down on 1 May 2013 ([2013] FamCA 279), there exist “discrepancies in the disclosure of the assets and liabilities of the husband which may be the subject of more detailed reliable evidence.” That sentence was not intended to be read as a definitive finding that any information that he provided about his financial circumstances was not to be relied upon.
Rather, the sentence was intended to convey the point that there are several areas of dispute concerning the husband’s financial circumstances and that those matters would be properly dealt with during the final hearing of the matter.
The joint judgment of Kay, Coleman and Warnick JJ in Browne & Green (Supra) as extracted above confirms that a proper engagement with s 117(2A)(a) does not involve “a search for minutiae” nor is it “the time for conducting a wholesale examination into every aspect of the parties’ financial circumstances.”
Accordingly, it can be seen that the parameters of a costs application do not allow for the wholesale examination of the material advanced by the husband as to his current financial circumstances. All that is needed is “an inquiry to enable the Court to have some concept of the relative financial positions of the parties.”
Such an inquiry allows me to make the following findings.
I find that that the wife’s situation is dire and that she is totally reliant on the spousal maintenance payments from the husband.
I also find, as a general proposition, that the husband is also facing trying financial times. However, I do not make a finding that the husband’s financial circumstances are such that the wife should be denied an order for costs if the other factors in s 117(2A) suggest that such an order should be made.

Section 117(2A)(b) – Whether any party is legally aided

Neither party to the proceedings is legally aided.

Section 117(2A)(c) – Conduct of the parties

Ms Kari, Counsel for the wife submitted that the husband’s conduct in the spousal maintenance proceedings was “a significant factor” in determining the issue of costs. She spoke of the “very long and protracted history” of the proceedings including alleged instances of the husband’s non-compliance with orders and his failure to provide full disclosure relating to his financial affairs which led to the conclusion in the 1 May 2013 judgment that the husband’s situation was not as financially dire as he may have suggested. She also referred to the issue of the husband allegedly “forgetting” to disclose a property in Town M.
Ms Kari also referred to the “invidious position” that the husband’s conduct placed her client in by his non-compliance with the existing spousal maintenance orders.
Counsel for the husband, Mr McQuade, argued that there was no relevant failure to disclose by the husband as the purchase of the Town M property by the husband had been disclosed by the time the spousal maintenance proceedings were “on foot”, that being the time that the husband filed his Application in a Case on 5 July 2012. He further submitted that the Court had “left the disclosure or non-disclosure matters to trial.”
As noted in the joint judgment of Evatt CJ, Smithers and Baker JJ in the Full Court of the Family Court of Australia decision of Nemeth & Nemeth [1987] FLC 91-844 at 76,385, “the failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs.”
However, the impugned conduct of the party must be shown to have imposed some additional burden upon the party that is requesting costs from the first named party (see the joint judgment of Evatt CJ and Gibson J in Greedy & Greedy [1982] FLC 91-250 at 77,382–77,383 and the decisions referred to therein including Tuck & Tuck [1981] FLC 91-021; Rouse & Rouse [1981] FLC 91-073 and Kelly & Kelly (No 2) [1981] FLC 91-108).
The joint judgment of Kay, Coleman and Warnick JJ in Browne & Green (Supra) stated at 89,162 that:
… the weight to be given to a failure to make discovery will in each case need to be assessed in the light of the nexus, if any, between the failure and the costs incurred, the substance of the non-disclosure, and of course the other relevant factors in the case.
Counsel for the wife did not attempt to establish that required nexus in her oral submissions at the hearing of the costs application. It is clear that such a nexus exists from an examination of the transcript of the hearing of the spousal maintenance application on 11 December 2012.
At the hearing of 11 December 2012, then counsel for the wife Mr Berman SC (as he then was) devoted almost the entirety of his submissions to explaining the husband’s financial circumstances. Amongst other issues, counsel noted that over $1,000,000 in matrimonial assets had somehow disappeared from the matrimonial asset pool between the filing of the husband’s earlier Financial Statements and his most recent Financial Statement. As an example, Item B on page 9 of the husband’s Financial Statement filed 6 December 2012 states that an international portfolio of shares that cost $744,726 was now worth nothing. No explanation was provided for this significant reduction to the matrimonial asset pool. Indeed, as noted by her then counsel, the only way that the wife was in any position to attack the husband’s assertion that he was unable to pay the wife spousal maintenance was by taking the dramatic step of unilaterally removing documentation from the husband’s business premises.
The only issue in dispute at the hearing of the spousal maintenance application was whether the husband had the capacity to pay the wife spousal maintenance. The husband did not dispute the wife’s contention that she was an appropriate candidate for spousal maintenance. He did not dispute the amount she was seeking other than to say that he had not been presented with receipts for the utilities associated with the former matrimonial home.
As noted in the judgment of Smithers J in Briese & Briese [1986] FLC 91-713 at 75,180–75,181 (and affirmed by the joint judgment of Emery, Fogarty and Murray JJ in Oriolo & Oriolo [1985] FLC 91-653 at 80,256–80,257),
A person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.
As I have already noted, the discrepancies in the disclosure of the assets and liabilities of the husband are likely to be the subject of more detailed and reliable evidence at the final hearing. Findings of fact will be made and the true extent, if any, of the husband’s non-disclosure will be known.
However, I can say, at this stage of the proceedings that the husband has not complied with the “positive obligation” spoken of by Smithers J in Briese as extracted above. It is not enough to simply disclose in a Financial Statement, for example, a loss of approximately $700,000 from the matrimonial asset pool without clearly explaining how that loss occurred. This is particularly so where, as here, the husband was in control of the vast majority of the assets comprising the matrimonial asset pool during the marriage and continues to be.
I am of the view that this conduct falls within the matters referred to in s 117(2A)(b) as a matter relevant to the determination of departing from the general rule that each party is to bear their own costs in proceedings under the Act. I also find that there is a sufficient nexus between the husband’s conduct and the costs incurred by the wife in defending the husband’s Application in a Case filed 5 July 2012.

Section 117(2A)(d) – Whether the proceedings were necessitated by a parties’ non-compliance with orders of this court

Counsel for the wife argued that the proceedings at hand were necessitated by the husband’s non-compliance with those orders, in that the husband was not paying the requisite spousal maintenance at the time the application was filed.
However, it could be argued in this case that, given the fact the proceedings in question were commenced by the husband upon the filing of his Application in a Case in July 2012, that any non-compliance at any point in time by the husband prior to or after that filing did not “necessitate” the proceedings.
It may be that when the time comes to consider the costs implications arising out of the wife’s Application in a Case filed 4 September 2012 this subsection will have some relevance. That is not the case in the matter at hand.

Section 117(2A)(e) – Whether any party to the proceedings was wholly unsuccessful

Counsel for the wife submitted that the husband had been totally unsuccessful in these proceedings. She noted that his Application in a Case sought either a discharge of the existing Consent Orders concerning the spousal maintenance or a variation of the orders such that the husband would ultimately pay less spousal maintenance. She further contended that it did not matter that the wife failed in successfully having every order that she sought in her Amended Response granted as the subsection speaks of a party being “wholly unsuccessful” as opposed to a party being “wholly successful.”
Counsel for the wife further submitted that the fact that the wife’s Application in a Case filed on 4 September 2012 seeking enforcement orders was unsuccessful is irrelevant to the issue of the costs of the matter at hand.
Counsel for the wife noted that the enforcement orders that the wife sought in her Amended Response to the husband’s Application in a Case were not dismissed, rather, they were adjourned to trial.
Counsel for the husband argued that the husband has not been “wholly unsuccessful” as the orders of 1 May 2013 apparently result in him paying less spousal maintenance. The husband’s argument is that, whilst the husband now pays $1,250 per week spousal maintenance instead of the previous amount of $1,000, the fact that he has been relieved of paying the expenses set out in orders 1(c)(i)-(vii) of the Consent Orders certified on 21 December 2011 means that the husband is now, in effect, paying less spousal maintenance than previously.
Counsel for the husband also noted that the wife had not been wholly successful as my orders of 1 May 2013 were not identical to those sought by the wife in her Amended Response filed 27 November 2012 (Document 31).
The joint judgment of Stephen, Mason, Aickin and Wilson JJ of the High Court of Australia in Penfold v Penfold [1980] FLC 90-800 at 75,054 is authority for the proposition that an order for costs under s 117(2) can be made despite the fact that the applicant for costs was not successful in obtaining every single order that they were seeking during the proceedings for which they are now seeking costs.
I am also inclined to agree with the wife that the husband was in fact wholly unsuccessful in these proceedings. The husband filed his Application in a Case seeking orders that he either pay no spousal maintenance or less spousal maintenance.
I do not consider that the husband’s attempt to compare what he was paying under the previous Consent Orders concerning spousal maintenance ($1,000 per week as well as certain rates and expenses) with the amount that he is now required to pay ($1,250 per week) in any way detracts from the conclusion that his Application in a Case was unsuccessful.
This factor favours the granting of the wife’s application.

Section 117(2A)(f) – Offers of settlement

I did not receive submissions from either counsel as to whether any offers of settlement had been made regarding the husband’s Application in a Case filed 5 July 2012.
However, a letter annexed to the wife’s affidavit filed 28 May 2013 addressed to the husband’s solicitors from the wife’s solicitors dated 21 May 2013 includes the following passage:
Noting that you client was wholly unsuccessful in his Application to have the spousal maintenance orders dismissed (and our client was wholly successful in having the amount of the spousal maintenance order increased) we have been instructed to attempt to agree the quantum of costs that should be payable to your client - noting the comments made by Her Honour in her Judgment about his non-compliance and the terms of paragraph 5 of the Orders.
Please find enclosed (*) herewith Schedule of Costs that we have prepared after a careful consideration of our client’s files and Accounts issued. Not including usual disbursements, the total cost incurred by our client is $26,063.13.
To resolve the matter quickly and by agreement, our client has instructed us that she will accept the amount of $20,000.00 in full and final settlement of her costs associated with the application.
Please let us have your client’s instructions as to this proposal by the close of business this Friday, 24/05/2013. If the matter cannot be agreed then your client is on notice that we will ask the Court to swiftly re-list the matter pursuant to paragraph 5 of the Orders for a determination by the Court as to the quantum payable.
Your client is on notice that the costs of that exercise will be sought on an indemnity basis if such action becomes necessary.
The husband’s solicitors replied via written correspondence on 23 May 2013 in the following terms:
Whilst our client was unsuccessful in his application to discharge the order, we note the terms of your client’s Amended Response to an Application in a Case filed on 27 November 2012, which sought a raft of orders, all of which were argued during the course of the argument before Justice Dawe. One of your client’s applications (paragraph 2) sought an order that our client pay the sum of $1,500 per week, together with a large number of other expenses. Your client was not successful in obtaining the order that she sought for the payment of $1,500, nor did she obtain any of the other orders sought in paragraphs, 2, 3 and 4 of that Response.
Accordingly, your client’s proposal as to costs is rejected. In any event, regardless of whether the Court might be minded to make some order for costs at some stage, our client has no capacity to meet any such order. So much should be apparent to your client from the raft of financial information which has been provided to you over a long period of time. Our client does not have the capacity to meet an order for costs of the quantum claimed by your client, nor in fact any order for costs.

Section 117(2A)(g) – Other relevant matters

This subsection is “an independent source of discretion,” the effect of which “is not limited by the particular matters set out” elsewhere in s 117(2A) (Lindenmayer J in Telfer and Telfer [1996] FLC 92-688 at 83,139). It is an “all-encompassing passage” that enables the Court to have “regard to such other matters as the Court considers relevant” (Lindenmayer J in Telfer and Telfer (Supra).
I did not receive any submissions other than those already discussed above. I do not consider that there are any other relevant matters to the determination of the matter at hand.

Conclusion on s 117(2)–(2A) of the Act

Upon considering the factors provided for in s 117(2A) of the Act, I consider that there are circumstances that justify the making of a costs order. In particular, I rely upon my findings as to s 117(2A)(c) and (e) in coming to my conclusion.

Consideration of the how the costs order is to be quantified

Counsel for the wife confirmed at the hearing that her client was seeking costs on an indemnity basis. The schedule of costs incurred by the wife as annexed at Annexure “C” of the wife’s solicitors’ affidavit filed on 28 May 2013. is calculated on an indemnity basis. That is, the schedule of costs has not been quantified with reference to the scale of costs contained at Schedule 3 of the Rules.

The Explanatory Guide to the Rules provides a definition of “indemnity basis” as “an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.”
That definition is to be contrasted with the definition for “party and party costs,” which are defined as “the costs payable by one party to another party under these Rules or by order.” Rule 19.19 of the Rules prescribes the maximum amount of party and party costs recoverable by a party as an amount calculated in accordance with Schedules 3 and 4 of the Rules.
The availability of costs orders quantified on an indemnity basis was recently considered by Thackray, Ryan and Murphy JJ sitting as the Full Court of the Family Court of Australia in Prantage & Prantage [2013] FamCAFC 105(17 June 2013).
The Full Court in Prantage & Prantage (Supra) affirmed the earlier Full Court decision of Kohan & Kohan [1993] FLC 92-340. In Kohan & Kohan (Supra) Strauss, Lindenmayer and Bulley JJ held that, although the Court does have the power to make an order for indemnity costs, such an order would be “a very great departure from the normal standard” (at 79,611). The Court went on to note that “the circumstances justifying the departure should be of an exceptional kind” (at 79,614).
As noted by Holden CJ in Munday & Bowman [1997] FLC 92-784 at 84,660, the joint judgment in Kohan & Kohan (Supra) does not “give any indication of what might be regarded as exceptional circumstances” that would justify an order for indemnity costs as opposed to costs made on a party and party basis.
It is, however, certain that “the conduct of the party that is relevant to the issue of indemnity costs is the party’s conduct as a litigant” (Lindgren J in NMFM Property Ltd v Citibank Ltd (No 11) (2001) 187 ALR 654 at 668.
The joint judgment of Lindenmayer and Holden JJ in Yunghanns & Yunghanns [2000] FLC 93-029 at 87,471 confirmed that “the categories of circumstances which enliven the discretion to award indemnity costs are not closed” before noting, relying on the judgment of Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233, that “all that is required is that the Court asked to exercise the discretion be satisfied that some ‘particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis.’”
Elsewhere in his Honour’s judgment in Munday & Bowman (Supra) Holden CJ goes on to further discuss the judgment of Shepherd J in the Colgate-Palmolive Company v Cussons Pty Ltd (Supra) decision:
His Honour then went on to note some of the circumstances which have been thought to warrant the exercise of the discretion to award costs on an indemnity basis. Some examples which may be of relevance to the present case are as follows:
(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 false 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.
As I have already noted, the availability of indemnity costs is not limited to specified circumstances. In the words of Lindgren J in NMFM Property Ltd v Citibank Ltd (No 11) (2001) 187 ALR 654 at 668:
Moreover, it is important not to treat descriptions in past cases of circumstances in which a court has found it proper to make an order for payment of indemnity costs as if they were the language of a statute or as if they mandated the making of an order in any future case to which the same description may be literally applicable.
However, the comments above are indicative of the level of misconduct that calls for indemnity costs.
Finally, I note that costs orders, including those made on an indemnity basis, are not to be used as punitive measures (per Mason CJ in Latoudis v Casey (1990) 170 CLR 534 at 543). However, “conduct that might otherwise give rise to a punishment can be … directly relevant to a consideration of indemnity costs” (per Murphy J in Donaghey & Donaghey (costs) (2012) 47 Fam LR 306 at 316).
Counsel for the wife’s submissions on the appropriateness of an order for costs determined on an indemnity basis centred on the husband’s non-compliance with the Consent Orders dictating the amount of spousal maintenance that the husband was to pay to the wife.
In summary, Ms Kari submitted that the husband had stopped complying with the existing Consent Orders “well before” he filed his Application in a Case to vary or discharge those orders. Ms Kari also referred to the “invidious situation” that the husband’s non-compliance placed the wife in, to the point that she was “living week to week or day to day due to the uncertainty [the husband’s non-compliance] put her in.”
In response, counsel for the husband argued that the husband was “up to date” with his spousal maintenance payments at the time the application was argued as the wife had taken funds from one of the parties’ business accounts. He further argued that the husband’s behaviour “might pertain” to an application to enforce the existing spousal maintenance orders, but that said conduct did not pertain to the application by the husband to discharge the spousal maintenance order.
In reply, Ms Kari contended that there was a “big difference” between the husband being up to date because he was complying with the orders, and the husband being up to date because the wife was forced to take capital from one of the business accounts.
I am not satisfied that it would be appropriate to make an order for indemnity costs in this matter. The wife’s submissions on this point centred on the husband’s extended period of non-compliance with orders of this Court.
Non-compliance with orders is a factor that can be relevant to a departure from the usual rule that each party is to bear their own costs in proceedings under the Act (s 117(2A)(c)).
The mere assertion of non-compliance is not enough to substantiate the circumstances of an “exceptional kind” that would justify the “very great departure from the normal standard” as spoken of in Kohan & Kohan (Supra).
There is a further reason why an order for costs as assessed on an indemnity basis is not appropriate in this matter. The joint judgment of Strauss, Lindenmayer and Bulley JJ in Kohan & Kohan (Supra) states at 79,611:
We are of the opinion that in an appropriate case, the Court has a discretion to order costs on an indemnity basis and that such costs may be ordered, where they have been incurred under a costs agreement which departs from the usual scale of costs. However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should now know the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s 117(2A)(a), or perhaps even more as a relevant matter under paragraph (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
That above proposition as extracted from the joint judgment in Kohan & Kohan (Supra) has been enshrined in r 19.08(3) of the Rules. That rule provides that “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 cost agreement.”
The making of an order for costs as determined on an indemnity basis without having reference to the terms of the applicant’s costs agreement is an appealable error (see generally the joint judgment of Bryant CJ and Warnick JJ in LGM & CAM (Contempt) (No 2) [2008] FLC 93-355 at 82,318–82,320, Finn J concurring at 82,328).
To similar effect, Holden CJ noted in Munday & Bowman (Supra) at 84,661 that the inability to ascertain “the full extent to which the [costs] agreement exceeds the parameters set by the scale” would of itself “seem to preclude any exercise of the relevant discretion” to award indemnity costs in favour of the applicant.
I was not presented with a copy of the wife’s costs agreement. I was, however, presented with a schedule of costs that the wife incurred throughout the proceedings arising out of the husband’s Application in a Case. That schedule allows me to infer certain aspects of the costs agreement between the wife and her solicitors. For example, a cursory examination of the schedule of costs suggests that the wife has agreed to pay $120 per page for every letter that her solicitors produce.
However, the schedule of costs that was produced to me does not enable me to consider “the extent to which [the wife’s costs agreement] exceeds the parameters set by the scale.” This is because the Rules employ different units of measurement than that employed by the wife’s schedule of costs.
For example, item 103 in the “Itemised scale of costs” contained at Schedule 3 of the Rules provides for a charge of “$21.41 per 100 words” for “Drafting and producing letters (including fax or e-mail transmissions)”. I was provided with no submissions from counsel as to whether the charge of $120 per page as referred to in the wife’s schedule of costs exceeds the charge set by the scale.
As noted above in the extract of the Kohan & Kohan (Supra) joint judgment, “the degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.”
I am unable to determine the degree to which the wife’s cost agreement departs from the norm established by the scale in the Rules. That, combined with the reasons I have already discussed, lead me to conclude that it would be inappropriate to order that the wife’s costs be determined on an indemnity basis.
I conclude that the wife’s costs are to be determined on a party and party basis. If the parties are unable to reach agreement on what that figure would be within 21 days, the costs are to be assessed by a Registrar of this Court pursuant to Chapter 19 of the Rules.

The husband’s oral application for costs made on 10 September 2013

Counsel for the husband made an oral application for the costs of the wife’s Application in a Case filed on 4 September 2012. I dismissed the wife’s Application in a Case on 14 September 2013.
I also made an order on that day that “both parties’ costs of today’s application are reserved.” The intention of that order was that the issue of the costs of the wife’s Application in a Case would be a matter determined at the final hearing of these proceedings.
Nothing that has occurred since the making of the order suggests I should bring forward that consideration. Accordingly, I make a further order dismissing the husband’s oral application for the costs of the wife’s Application in a Case filed on 4 September 2012 and, once again, reserve both parties’ costs of that application to the date of the final hearing of these proceedings.

Conclusion

For the foregoing reasons, I make the orders that appear at page 2 of this judgment.

I certify that the preceding one hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe delivered on 21 October 2013

Associate:

Date: 21 October 2013

[2013] FamCA 809

21 October 2013

Key Legal Topics

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Family Law

Civil Procedure

Legal Concepts

Costs

Remedies