G & G (A LAW FIRM) & MCMURPHY - [2012] FamCAFC 134

FAMILY COURT OF AUSTRALIA

G & G (A LAW FIRM) & MCMURPHY

[2012] FamCAFC 134

FAMILY LAW – APPEAL – COSTS – Between solicitor and client – where the respondent was a former client of the appellant law firm in relation to her family law proceedings – where the trial judge made orders setting aside the costs agreement and requiring the appellant to pay the respondent’s costs in relation to her application for final orders in the sum of $80,000 within 28 days, and in the event the appellant failed to pay required the appellant to pay costs on an indemnity basis – where the trial judge inappropriately took into account two matters when determining indemnity costs were justified, but the strength of the remaining circumstances in relation to the appellant’s conduct and credit justified an award for indemnity costs – where it was open to the trial judge to refer to and rely on certain factors to reach her decision which were not the subject of submissions by the respondent – where the trial judge erred in making an order which potentially allowed for an entirely different amount to be paid in the event the appellant defaulted – appeal allowed in part and the error remedied by excising the default order.

FAMILY LAW – APPEAL – APPLICATION TO ADDUCE FURTHER EVIDENCE – where the respondent sought to adduce a letter from the appellant’s solicitors enclosing a bank cheque payable to the respondent and an amended Itemised Costs Account to buttress the findings of the trial judge – where given the findings of the Full Court it was unnecessary to address this application – application dismissed.

FAMILY LAW – COSTS – where neither party was wholly successful or unsuccessful – where the issue on which the appeal was allowed did not take up much time at the hearing nor was it the subject of extensive written submissions – the appellant to pay the respondent’s costs of the appeal on a party/party basis.

Family Law Act 1975 (Cth) s 117

CDJ v VAJ (1998) 197 CLR 172
Collins & Collins (1985) FLC 91-603
D & D (Costs) (No 2) (2010) FLC 93-435
Fennessy & Gregorian (2009) FLC 93-399
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123
Fraser & Moedt (Unreported, Family Court of Australia, Nicholson CJ, Lindermayer and May JJ, 30 October 1997)
International Finance Trust Company Limited and Anor v NSW Crime Commission and Ors (2009) 240 CLR 319
Kohan and Kohan (1993) FLC 92-340
Latoudis v Casey (1990) 170 CLR 534
Limousin v Limousin(Costs) (2007) 38 Fam LR 478
Munday v Bowman (1997) FLC 92-784
Re JJT and Ors: ex parte Victoria Legal Aid (1998) 195 CLR 184
Ruddock and Ors v Vardalis (No. 2) (2001) 188 ALR 143
Yunghanns and Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029
Stephens& Stephens and Anor (2011) 44 Fam LR 117

APPELLANT:

G & G (a Law Firm)

RESPONDENT:

Ms McMurphy

FILE NUMBER:

MLC

4782

2010

APPEAL NUMBER:

SOA

2011

DATE DELIVERED:

27 August 2012

PLACE DELIVERED:

Adelaide

PLACE HEARD:

Melbourne

JUDGMENT OF:

Bryant CJ, Faulks DCJ and Strickland J

HEARING DATE:

7 October 2011

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

8 April 2011

LOWER COURT MNC:

[2011] FamCA 242

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr St John SC

SOLICITOR FOR THE APPELLANT:

Webb Korfiatis

COUNSEL FOR THE RESPONDENT:

Mr Brown SC

SOLICITOR FOR THE RESPONDENT:

Schetzer Constantinou

Orders

The oral application by the respondent to adduce further evidence be dismissed.
The appeal be allowed in part.
The order made by Cleary J on 8 April 2011 be varied to read as follows:
(a)
That the respondent pay the applicant’s costs of and incidental to her application for final orders filed 25 June 2009 (as amended on

3 August 2009) in the sum of $80,000, such sum to be paid within 28 days of the date of these orders.
Otherwise the appeal be dismissed.
The appellant pay the respondent’s costs of the appeal on a party and party basis as agreed, and in default of agreement, as assessed.

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

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SOA 36 of 2011
File Number: MLC 4782 of 2010

G & G (a Law Firm)

Appellant

And

Ms McMurphy

Respondent

REASONS FOR JUDGMENT

Introduction

By Notice of Appeal filed on 5 May 2011 G & G (a Law Firm) (“the appellant”) appeals against costs orders made by Cleary J on 8 April 2011. The respondent to the appeal is Ms McMurphy (“the respondent”), a former client of the appellant in relation to her family law proceedings.
The order appealed against required the appellant to pay the respondent’s costs of and incidental to her application for final orders in the sum of $80,000 within 28 days. In the event the appellant failed to pay within the stipulated time period the order required the appellant to pay costs on an indemnity basis, as agreed or assessed.
On appeal the appellant seeks an order that the respondent’s costs of and incidental to her application for final orders be assessed on a party and party basis, as agreed or taxed. The respondent seeks that the appeal be dismissed and that the appellant pay her costs of the appeal on a party and party basis.

Background

The respondent was a client of the appellant law firm between September 2007 and March 2009 in relation to her family law proceedings.
The respondent and the appellant entered into a costs agreement on

25 September 2007.
In December 2008 the family law proceedings were settled at a mediation. The settlement provided for the sale of the former matrimonial home and the distribution of the proceeds to the parties.
In late March 2009 the respondent withdrew her instructions to act from the appellant, and instructed another firm to act for her in the settlement of the sale and in relation to costs. The appellant advised the respondent’s new solicitors that its outstanding legal costs were $238,143.18, and the respondent agreed to that amount being paid out of her share of the proceeds of sale of the home.
In April 2009 the appellant applied for a costs order, and on 8 April 2009 a Registrar made a costs assessment order in the sum of $234,317.83. The appellant did not serve this order on the respondent.
Settlement of the sale of the home took place on 29 May 2009 and the appellant received the sum of $238,143.18 from the respondent’s share of the proceeds.
By Amended Initiating Application filed 3 August 2009 the respondent sought orders, inter alia, that the costs agreement dated 25 September 2007 be set aside and that the costs assessment order dated 8 April 2009 be declared invalid or, in the alternative, an extension of time to have the costs assessment order set aside.
The matter was heard by Cleary J over three days in August 2010 and

her Honour made orders and delivered her reasons for judgment on

19 November 2010. The respondent was successful in having the costs agreement set aside, which obviated the need for the costs assessment order to be set aside. However, in any event, an extension of time was granted for the respondent to make such an application, and the costs assessment order was also set aside by her Honour. The orders further provided for written submissions to be filed in the event of an application for costs being made.
Both parties applied for costs, with the respondent delivering written submissions, the appellant delivering a response, and the respondent then providing a reply.
The trial judge made orders and delivered her reasons for judgment in relation to costs on 8 April 2011.

Reasons for judgment delivered 8 April 2011

The trial judge commenced her reasons for judgment by setting out a brief history of the proceedings and each party’s application for costs. To summarise, the respondent sought orders for costs fixed in the sum of $80,000, or in the alternative, on an indemnity basis in default of agreement (“the first application”). The appellant opposed the first application on any basis, but submitted that in the event the Court determined a costs order should be made it should only be calculated on a party and party basis. The appellant then sought its own costs order on a party and party basis (“the second application”). This was opposed by the respondent. Lastly, the respondent made an additional application for a “refund order”, which was unrelated to the costs arising from the proceedings then before her Honour. By this application the respondent sought a refund of the amount of costs that had been paid to the appellant together with interest thereon. The appellant opposed that application.
Her Honour then set out the relevant statutory provision as to costs, namely

s 117 of the Family Law Act 1975 (Cth) (“the Act”), and addressed the first application, taking into account the relevant s 117(2A) matters.
As to the financial circumstances of the parties, her Honour noted that the respondent was not in paid employment, that she had the care of two young children, and that her only asset was her share of the sale proceeds from the former matrimonial home. From those proceeds the appellant had received $238,143.18 pursuant to the costs agreement. Otherwise, the respondent received $70,000, but that amount had been exhausted by the time of the hearing.
The appellant asserted that the respondent received $90,000 from the sale proceeds and that she should have been receiving “capital instalments” from her former husband by way of 156 payments of $1,641 each, pursuant to a binding financial agreement signed post-separation. Her Honour found herself “unable to determine this aspect of the matter”.
Her Honour recorded that the appellant was “silent” as to its own financial circumstances except for Mr G’s evidence in the substantive proceedings that “the office account of the [appellant] was in fact or effect his own account”. Thus, her Honour accepted the respondent’s submission that “it would be impossible to know the financial position of the [appellant] without undertaking a detailed analysis of the financial situation of the principal solicitor” and, in the absence of contrary evidence, the trial judge inferred the appellant was “solvent and able to meet a costs order”.
As to the conduct of the parties in relation to the proceedings, her Honour noted the issues surrounding Mr G’s refusal to hand over the respondent’s family law file when the matter was taken over by another solicitor. Given that the respondent had paid all costs and disbursements in full the trial judge determined that she was at all times entitled to the return of her file.
As to whether either party had been wholly unsuccessful in the proceedings, her Honour rejected the appellant’s submission that the respondent was “wholly unsuccessful” because she was not granted an extension of time in the substantive proceedings to serve a request for an itemised account and to serve a Notice Disputing Itemised Costs Account. The trial judge did take into account though the appellant’s conduct in failing to issue fresh bills of costs to the respondent as a result of the costs agreement being set aside, and in retaining monies paid by the respondent without attempting to rectify the position with the respondent.
The trial judge also noted the respondent’s offer to settle made on 13 July 2010 and the respondent’s attempt to negotiate a settlement of her costs prior to the commencement of proceedings, including by way of an offer to settle made on 20 May 2009.
Lastly, in relation to s 117(2A)(g) the trial judge took into account the appellant’s conduct in obtaining the costs assessment order “for the purpose of making it more difficult” for the respondent to set aside the costs agreement between the parties, and the failure to serve that order. Her Honour also considered the appellant’s conduct in refusing to release the respondent’s family law file, in tactically delaying acknowledgment of a mistake in the respondent’s Notice of Discontinuance, and in retaining the funds received from the sale proceeds of the former matrimonial home rather than paying out disbursements, including counsel fees.
The trial judge determined the respondent had been “deprived of the difference between the amount paid and that which she will ultimately be assessed to pay by the Court”, which her Honour considered would be “significantly less than costs actually paid by the [respondent], given the changed basis for assessment”.
Thus, the trial judge determined there were “circumstances that justify a departure from the general rule that each party pay his or her own costs”.
Turning to the claim for indemnity costs, the trial judge set out the principles to be taken into account when making a costs order on an indemnity basis, including those enunciated by Sheppherd J of the Federal Court in Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225. Her Honour ultimately determined that there were “extraordinary features” of the case which justified an order for costs on an indemnity basis. Her Honour also found indemnity costs were warranted in the unusual circumstances of a solicitor taking an “unrelenting tactical approach to a former client before, during and after the time she successfully applied to set aside his costs agreement” and in doing so had “prolonged” every issue. Thus, her Honour said the respondent “should be fully compensated for the resulting expense”.
Turning to the second application, the trial judge found it was “fundamentally flawed” because the costs agreement between the parties had already been set aside. Her Honour noted the appellant’s application relied on delays in the substantive proceedings caused by the respondent’s need to seek leave to extend time to apply to set aside the costs assessment order, her amendment of an incorrect Notice of Discontinuance, and her issue of a subpoena to obtain her files. In relation to the latter two matters, the trial judge again noted the appellant’s conduct and determined it could not rely on delays which it caused in supporting its own costs application. Her Honour also found that the appellant was “wholly unsuccessful in the substantive proceedings” in that the lump sum account dated 24 September 2008 was formulated on an “untenable basis”, and subsequently an extension of time to serve requests and notices in relation to that account was not needed because all bills needed to be redrawn as a result of the costs agreement being set aside. Thus, the trial judge dismissed the respondent’s application for costs.
Lastly, her Honour turned to consider the respondent’s application for a refund order in the amount of $268,824.38. As the application did not relate to the costs of the proceedings to set aside the costs agreement and the costs assessment order, her Honour could find no jurisdictional basis for dealing with the application. The trial judge also referred to her reasons for judgment in the substantive proceedings and confirmed that “in the event the [respondent] and [appellant] are unable to agree about costs, the dispute can be taken to the Registrar in the ordinary way”.

Grounds of appeal and orders sought

The amended grounds of appeal filed by the appellant on 19 August 2011 are as follows:
1.The Trial Judge made errors of fact and/or law.
2.The Trial Judge erred in requiring the Appellant to pay the Respondent’s costs assessed other than on a party/party basis.
3.When determining that the Appellant should pay the Respondent’s costs assessed on an indemnity basis the Trial Judge had regard to matters not proper or relevant to be considered pursuant to
s. 117(2A) of the Family Law Act.
4.When determining the Respondent’s Application that the Appellant should pay costs assessed on an indemnity basis the Trial Judge had regard to the conduct of the Appellant other than in his capacity as litigant in the proceedings and inappropriate to be considered when determining such application.
5.When determining that the Appellant pay costs on an indemnity basis the Trial Judge improperly gave consideration to matters that were punitive to the Appellant, or compensatory of the Respondent’s general financial position, rather than compensatory of her costs of the proceedings.
6.In making an Order for indemnity on grounds other than those advanced by the Respondent, and affording the Appellant no opportunity to respond to the different and additional factors she had identified, the Trial Judge denied the Appellant natural justice.
7.The Order ultimately made (ie that the Appellant pay a fixed sum of $80,000 or in default, pay indemnity costs) was internally inconsistent in circumstances where a claim for costs of $101,689.70 was advanced on behalf of the Respondent.
The orders sought by the appellant were also set out in the document containing the amended grounds of appeal filed 19 August 2011, namely that the appellant pay the respondent’s costs of and incidental to her Application for Final Orders filed 25 June 2009 (as amended on 3 August 2009) with such costs to be assessed on a party and party basis, as agreed or taxed.

Discussion

With the amended grounds of appeal we can safely ignore Grounds 1 and 2 as being no more than the general grounds of appeal in respect of which Grounds 3 to 7 provide the specific complaints and challenges.
Unhelpfully the written submissions of the appellant fail to address Grounds 3 to 7 seriatim as required by the Family Law Rules 2004 (Cth). However, from those submissions, and the oral submissions made by the appellant’s senior counsel at the hearing before us, it seems that Grounds 3, 4 and 5 can be conveniently grouped together, whilst each of Grounds 6 and 7 need to be addressed discretely.

Grounds 3, 4 and 5

These grounds challenge her Honour’s finding that an award of indemnity costs was warranted. It is submitted that her Honour erred in three respects in making such a finding, namely:
a)Her Honour had regard to matters not proper or relevant to be considered under s 117(2A) of the Act (Ground 3).
b)Her Honour inappropriately had regard to the conduct of the appellant other than in its capacity as a litigant in the costs proceedings (Ground 4).
c)Her Honour improperly gave consideration to matters that were punitive to the appellant, or compensatory of the respondent’s general financial position, rather than compensatory of her costs in the proceedings (Ground 5).
It is beyond doubt that in order to justify an award of indemnity costs it must be demonstrated that there are exceptional circumstances such that the usual order of party and party costs should be departed from.
This principle is clearly established in the oft-referred to Federal Court decision of Colgate-Palmolive where Sheppard J went on and provided examples where indemnity costs would be warranted. This decision has been followed in this court in cases such as Kohan and Kohan (1993) FLC 92-340, Munday v Bowman (1997) FLC 92-784, Yunghanns and Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029, Limousin v Limousin (Costs) (2007) 38 Fam LR 478, Fennessy & Gregorian (2009) FLC 93-399, and D & D (Costs)(No 2) (2010) FLC 93-435.
Her Honour was well aware of this principle and indeed referred at length to Sheppard J’s decision in Colgate-Palmolive.
The key paragraphs of her Honour’s reasons in relation to this issue are paragraphs 39 and 40 where her Honour identified the exceptional circumstances that she relied on to order indemnity costs. These paragraphs provide as follows:
39.In this particular matter, I do not consider that the [appellant] properly advised ought to have known that it had no prospects of success. I accept that the costs agreement set aside in this matter is one that the [appellant] has used in the past and intended to go on using. However there are extraordinary features of this case which I take into account:
1.That the [appellant] admittedly obtained a costs assessment order to make it more difficult for the [respondent] to obtain an order to set aside the costs agreement.
2.The failure of the [appellant] to release the family law files of the [respondent], as should have been done from the time all costs were paid by the [respondent] to the [appellant].
3.The matter which gave rise to adverse credit findings about Mr [G], particularly the matter involving an employed solicitor.
4.The assertion at the beginning of the proceedings that all counsel who had appeared in the family law proceedings had been paid. This assertion proved not to be correct, allowing the Court to draw the inference that the [sic] Mr [G] had not checked the accounts of the respondent before instructing counsel to make that statement.
5.The evidence in relation to counsel’s fees.
6.The [appellant’s] penalty clause of a 14 per cent additional fee for a request for an itemised legal costs account out of time.
7.The fact that the [appellant] had, at the time when costs submissions were made, failed to prepare fresh accounts in order to rectify the situation where he holds funds, likely well in excess of costs assessed by the Court, paid by the [respondent] his former client.
40.Overall it appears to the Court that an order for costs on the indemnity basis is justified in these particularly unusual circumstances where a solicitor takes an unrelenting tactical approach to a former client before, during and after the time she successfully applied to set aside his costs agreement which was found to be unfair and unreasonable. Such costs are not a penalty. The [appellant’s] approach resulted in every issue prolonged by correspondence and pursued in the hearing. The [respondent] should be fully compensated for the resulting expense.
[Footnotes omitted]

It is in these paragraphs where the appellant says that her Honour has erred, and we will now discuss each “feature” identified in paragraph 39.

1 and 2

It is said by the appellant that, “[i]n circumstances where the Trial Judge found that the Appellant had prospects of success … the attempt to strengthen its position in the litigation, whilst it may be a justification for an Order for party and party costs, does not justify an Order for indemnity costs (see eg D & D (Costs) (No 2) [2010] FLC 93-435, esp at para 31, Stephens at para. 118)”.
The paragraph of the Full Court decision in D & D(Costs) (No 2) referred to by the appellant provides as follows:
31. It has not been demonstrated that either the conduct of the appeal and/or the application for leave to adduce further evidence in the appeal would enliven the discretion to award indemnity costs. It has not been established that the hearing of the proceedings was prolonged or delayed, or that the hearing of the application itself was prolonged or delayed by anything done by the Husband or those advising him. To the extent that there may be substance in any of the complaints made by leaned Counsel for the Wife with respect to the consequences of learned Counsel for the Husband presenting the Husband’s case more expeditiously and economically than had been envisaged, those would be matters which would be supportive of a decision to award party/party costs.
The paragraph of the Full Court decision in Stephens& Stephens and Anor (2011) 44 Fam LR 117 also referred to by the appellant provides as follows:
[118] Notwithstanding our general agreement with the submissions on behalf of the wife, including that the proceedings were for enforcement, the disbursement of the amount of approximately $1.3 million, and other matters, we are not persuaded that the presumption in favour of party and party costs does not prevail. The husband’s behaviour may in some respects fall within the description identified by Gummow J in Botany Municipal Council v Secretary, Department of Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415; 27 ALD 481 at 484, as explained by Lindgren J in NMFM Property at [54], as “ethically or morally delinquent”. However, as Lindgren J made clear at [56]: “The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant”. [Emphasis in original.] Lindgren J then gave an example in the same paragraph of a “proved case of fraud” and said that, in his opinion, “the presumption is that a costs order against the fraudulent party will be on the party and party basis”.
The issue here is the egregious conduct of the appellant. There is no doubt that conduct can comprise an exceptional circumstance warranting an order for indemnity costs, and the authorities do not say otherwise. Indeed, as is common ground the categories of circumstances that can lead to an award of indemnity costs are not closed (Yunghanns) and it is unnecessary for the factual matrix to fall within the examples identified by Sheppard J in Colgate-Palmolive. There are limitations though, and for example the paragraph referred to from the decision in D & D (Costs) (No 2) indicates that it is relevant if the conduct complained of caused a prolongation or delay of the substantive hearing.
As is also apparent, the same circumstances that will justify an award of party and party costs can, if exceptional enough, lead to an award of indemnity costs. The difficulty of course is where to draw the line.
Another limitation emerges from the paragraph referred to in the decision of the Full Court in Stephens, namely that the conduct must be “the party’s conduct as litigant”.
Addressing the latter limitation first, we fail to see how the conduct of the appellant here can be described as anything other than “conduct as a litigant”. The parties to the proceedings were the appellant and the respondent; the appellant, as a party to the proceedings, obtained the costs assessment order against the respondent, and likewise, as a party to the proceedings, refused to comply with a legitimate request for the production of the files, requiring the issue of a subpoena.
As to the limitation arising from the paragraph from the Full Court’s decision in D & D (Costs) (No. 2) her Honour found in paragraph 40 of her reasons that, “the [appellant’s] approach resulted in every issue prolonged by correspondence and pursued in the hearing”. Now, although this is expressed in paragraph 40, as we will come to shortly, we consider that that paragraph comprises not just a stand alone ground justifying indemnity costs, but also summarises in some respects the circumstances set out in paragraph 39, and this aspect of the prolongation of issues is within that category. Indeed, to take just one example; on the evidence, the appellant’s refusal to comply with the legitimate and reasonable request for production of the files, as identified in paragraph 39, clearly resulted in delay and a prolongation of the proceedings.
Turning then to the issue of whether the line has been crossed by the appellant’s conduct identified in “features” 1 and 2 such that indemnity costs are warranted, we reject the submission of the appellant that what was done can be explained away as unexceptional because it was nothing more than an “attempt to strengthen” the appellant’s position in the litigation. It is not so much what was done, although that too is relevant, but in this case it was how it was done, and the fact that it was done in proceedings between a solicitor and his client.
The appellant concedes that the purpose of obtaining the costs assessment order, and we add, not serving it, was to make it more difficult for the respondent to obtain an order setting aside the costs agreement. In our view that goes beyond merely attempting to “strengthen” a position in litigation, and can be classified as an exceptional circumstance warranting an order for indemnity costs.
There is then the conduct by the appellant in refusing to release the files despite having been paid in full. The appellant’s senior counsel suggests that this was unexceptional because the files were in fact released once a subpoena was issued and an order made. However, that is clearly not the point. The files should have been released without the need to issue a subpoena and obtain an order and, as her Honour found, this made the task of the respondent’s solicitor far more difficult and clearly prolonged the proceedings.
We also observe that in fact the appellant did not comply with the order made for the production of the files. Rather than produce the actual files in accordance with the order, the appellant provided copies and there was then an issue about their completeness.
As to the fact that the dispute was between a solicitor and his client, there was of course no longer any fiduciary relationship between them, but the status of the appellant as a solicitor, the knowledge of law and procedure that is implied in that status, and the conduct that would be expected of an officer of the court, adds an extra element to the assessment of the conduct as exceptional, and particularly where the dispute is about a costs agreement between solicitor and client.
We can find no error in her Honour’s identification of these circumstances as exceptional such as to justify an award of indemnity costs. We observe though that the appellant suggests that these circumstances cannot justify indemnity costs for the entire litigation. However, again that submission misses the point. It is not just one or two circumstances that the trial judge relied on, but a range of circumstances permeating the entirety of the proceedings. That said, we do agree with the submission of the respondent that there are circumstances here identified and relied on by her Honour which by themselves justify an award of indemnity costs for the entirety of the proceedings. We consider that the circumstances identified in 1 and 2 in paragraph 39 are in this category.

3

The issue of credit is of course highly relevant to the question of costs. There is no challenge to the adverse credit findings made by her Honour, but once again it is said that although such a finding can justify an award of party and party costs, there is nothing exceptional here.
Having carefully considered the adverse credit findings we agree with the appellant that per se they do not justify indemnity costs. However, that is not to say that they are irrelevant to her Honour’s finding that overall indemnity costs are warranted. For example, it is quite apparent that the need to cross-examine the appellant, where very few if any concessions were made, prolonged the proceedings, and this of course given the adverse credit findings by her Honour resulted in the respondent incurring unnecessary costs. Thus, we consider that there is no necessary error here by her Honour in relying on this circumstance as just one aspect of her overall finding.

4

As submitted by the appellant’s senior counsel, this “circumstance” is in the same category as the adverse credit findings referred to above. Thus, per se, this may not justify an award of indemnity costs, but as one aspect of an ongoing course of conduct that does justify such an award, again, it is not necessarily irrelevant. As emerges from the submissions of the respondent in the appeal to the trial judge, she was put to the expense of proving what should have been conceded facts in the proceedings, including that the appellant in the appeal had retained counsel fees which should have been paid when the appellant received the sum of $238,143.18 from the proceeds of the sale of the home. The appellant would not concede that certain counsel had not been paid, and it was necessary for the respondent to call a witness to prove the non-payment of certain expenses when those matters plainly were within the knowledge of the appellant in the appeal. Thus, the respondent in the appeal was put to unnecessary expense to establish facts which should have been conceded.

5

The evidence referred to here was two-fold. First, the fact that the appellant had withheld payment of outstanding counsel fees notwithstanding funds were available to meet those fees, and secondly, that the appellant had charged the respondent interest upon counsel’s fees where counsel had neither required this nor been paid interest.
Again, the accuracy of this evidence is not challenged, but it is said that these circumstances “have nothing to do with the costs of litigation in the conventional sense”, and they are not able to be used to justify an award of indemnity costs. The complaint is that “the trial judge could arguably take [this] conduct into account as to credit … but such considerations have nothing to do with the costs of litigation in the conventional sense. The trial judge has instead sought to give financial redress for perceived financial detriment suffered by the Respondent and/or has penalised a perceived financial advantage obtained by the Appellant and/or penalized the conduct of Mr [G].” In other words, it is said that there is no “nexus to costs”.
It is clear from the High Court authorities relied on by the appellant, namely Ruddock and Ors v Vardalis (No. 2) (2001) 188 ALR 143, Re JJT and Ors : ex parte Victoria Legal Aid (1998) 195 CLR 184, and Latoudis v Casey (1990) 170 CLR 534, that an order made under s 117(2) must be “as to costs” and as was said by the Full Court in Stephens:
[67] An order for costs is made to compensate a party against expense incurred in litigation and is not punitive in nature. Costs are not a penalty or damages.
Prima facie, there is some force in the appellant’s argument as it applies to the first issue, that is, that the appellant had withheld payment of outstanding counsel fees notwithstanding funds were available to meet those fees, but we consider that in respect of the second issue, that is, that the appellant had charged the respondent interest upon counsel’s fees where counsel neither required this nor had been paid interest, it takes too narrow a view of “costs”. Where, for example, the circumstances under consideration have a nexus to the basis on which the substantive order is made then that can be enough to take that into account under s 117(2A)(g) bearing in mind that that paragraph simply refers to “such other matters as the court considers relevant”, and is not on its face linked to matters as to costs. It is clearly relevant to the costs agreement that the appellant charged the respondent interest when interest was not paid to counsel, and thus we consider that there is a sufficient nexus to the substantive order such that bearing in mind the terms of s 117(2A)(g) the requirement of a “nexus” to costs is satisfied. That nexus need not be solely about for example the time taken in court or the expenditure or costs incurred.

6

The appellant makes the same complaint about this “circumstance”, but we consider that it is quite different.
What the trial judge is referring to here is a clause in the costs notice delivered to the respondent which clearly constituted a variation to the terms of the costs agreement, and which her Honour found to be “inherently unfair”, and one of many bases for setting aside the costs agreement. It seems plain to us that that is a circumstance that can be taken into account under the strict wording of

s 117(2A)(g), and because of its particularly egregious nature can warrant an award of indemnity costs. It was relevant in deciding what if any order for costs should be made because it related directly to the setting aside of the costs agreement, and, if it is required under paragraph (g), there is also a clear nexus to the costs of the litigation, because to put it simply, at the very least the respondent had to incur costs to demonstrate that this clause was inherently unfair.
There is no question here, we suggest, of her Honour seeking to impose a penalty or damages by, for example, inappropriately taking into account the wider consequences of the solicitor retaining money and the client not receiving it back.

7

As explained in the appellant’s written submissions, the “gravamen” of this “circumstance” is that by not preparing fresh accounts the appellant “continued to hold monies perceived to be greater than those likely to be assessed in its favour on taxation, thereby giving it a financial advantage and causing the Respondent a corresponding financial detriment”. Thus, it is said, this has nothing to do with “the conventional costs of litigation”, and smacks of compensating the respondent for the perceived financial detriment and penalising the appellant for the perceived financial advantage.
We agree with this submission, and find that this was not a circumstance that the trial judge should have taken into account as warranting indemnity costs. That conclusion is bolstered somewhat by the fact that this related to a time after the substantive judgment was delivered and before the hearing of the application for costs. That confirms the lack of any relevant nexus with the costs of the substantive proceedings.
We turn then to paragraph 40 of the reasons for judgment which we have set out in paragraph 36 above. The debate has centred around whether this paragraph represented a cumulative summary of the circumstances identified in paragraph 39, or whether it was a stand-alone circumstance justifying indemnity costs, or both.
The appellant’s position was that it was the first of these three possibilities, and thus cannot add anything to the basis for ordering indemnity costs.
For our part, we consider that it is a stand-alone ground but it also in some respects summarises the factors identified in paragraph 39. That is apparent from the opening words of the paragraph which not only bring in the factors set out in paragraph 39, but set up the circumstance highlighted in paragraph 40, namely the “unrelenting tactical approach” by a solicitor to his former client.
We observe that the appellant conceded that if paragraph 40 is treated as containing a stand-alone feature then it “might” justify indemnity costs. We consider it does justify such costs, and even the narrow construction promoted by the appellant of the necessary nexus to the costs of litigation is clearly satisfied. As her Honour herself says in this paragraph, “[s]uch costs are not a penalty”.
There is also clear authority found in the unreported Full Court decision of Fraser & Moedt (Family Court of Australia, Nicholson CJ, Lindenmayer and May JJ, 30 October 1997) for costs to be awarded where a party is “intentionally obstructive”, and that is what has happened here. As was said by the Full Court in that case, “[a party] should not have to bear the cost consequences of the [other party’s] intentional tactics”, and it is clear from paragraph 40 of her Honour’s reasons that that is what has motivated

her Honour.
Accordingly we can find no fault with her Honour’s approach in paragraph 40.
Having addressed all of the circumstances identified by her Honour as justifying an award of indemnity costs, it is apparent that there are two features that her Honour inappropriately took into account, namely one aspect of 5, and 7. The question then becomes what effect does that have on her Honour’s decision.
The submission of the appellant is that because her Honour did not say at any point that each of the features identified are sufficient to justify indemnity costs, and her Honour instead took a cumulative approach, then the decision cannot stand. That is because in these circumstances we cannot be satisfied that the factors that were appropriate to be taken into account would have been considered sufficient for her Honour to order indemnify costs.
We reject that submission. Although it is apparent that two features should not have been taken into account, when we look at the strength of the balance of the circumstances, and in particular 1 and 2 in paragraph 39, and the stand-alone circumstance described in paragraph 40, there is still ample justification for an award of indemnity costs. Further, even if we were to allow the appeal for the reasons promoted by the appellant in this regard, it is beyond doubt that in re-exercising the discretion we would find that indemnity costs are justified relying of course on the balance of the circumstances. Thus, we see no utility in allowing the appeal as a result of these errors by her Honour.

Ground 6

There is no doubt that natural justice must be afforded to every litigant. As was said by French CJ in International Finance Trust Company Limited and Anor v NSW Crime Commission and Ors (2009) 240 CLR 319:
54. Procedural fairness or natural justice lies at the heart of the judicial function. In the federal constitutional context, it is an incident of the judicial power exercised pursuant to Ch III of the Constitution. It requires that a court be and appear to be impartial, and provide each party to proceedings before it with an opportunity to be heard, to advance its own case and to answer, by evidence and argument, the case put against it. According to the circumstances, the content of the requirements of procedural fairness may vary. …
Counsel contends that the appellant was not given any opportunity to respond to factors relied on by the trial judge to reach her decision which were not the subject of submissions by the respondent. However, we consider that this challenge is ill-founded. Certainly where a trial judge makes an order that comprises elements for example not the subject of evidence or submission it is beholden on the trial judge to give both parties the opportunity to address those elements. However, that is not what has happened here. Albeit the respondent did not rely on all of the circumstances found to be relevant by the trial judge, those circumstances were well known to both parties including the appellant, and were the subject of evidence before her Honour. Indeed, the appellant’s senior counsel was unable to take us to any circumstance relied on by the trial judge which was not in this category. Thus, it was open to the trial judge to refer to and rely on those circumstances without halting the case to have each party address what she proposed to take into account. If it were otherwise, there would be no end to litigation.

Accordingly, we find no merit in this ground of appeal.

Ground 7

This is an interesting challenge. In the application made to her Honour the respondent sought an order that the appellant pay the respondent’s costs of and incidental to her application for final orders fixed in the sum of $80,000, and in the alternative, the appellant pay the respondent’s costs on an indemnity basis, such costs to be taxed on that basis in default of agreement.
The actual costs to the respondent were said to be $101,689.70, and the “discount” to $80,000 was in order to avoid the costs of taxation and the delay that would be caused by that exercise.
However, as can be seen, the order made by her Honour was not in the alternative, but provided for a payment of $80,000, and in default of payment within 28 days the appellant was to pay the costs of the respondent “on the indemnity basis as agreed or assessed”. Unfortunately, nowhere does

her Honour explain why she has framed the order in that way.
The submission of the appellant is that her Honour has in effect made two inconsistent orders for costs, and in particular she became functus officio after she made the first order.
We consider that there is substance in this complaint.
The respondent contended that her Honour did not in fact make two separate and distinct orders, but rather she made one order comprising an order for the payment of $80,000 and then continued on to provide for enforcement of that order in the event of default. However, we consider that having made the order for payment of a fixed amount it was not open to her Honour to make what was plainly a second order which potentially allowed for an entirely different amount to be paid in the event of default. Her Honour should have stopped after making the order of $80,000 to be paid within 28 days.
The appeal should be allowed in part as a result of this error, but given we can find no error in her Honour’s conclusion that indemnity costs were warranted, and her Honour’s acceptance of an amount of $80,000 was appropriate, we would propose to remedy this error by deleting the second order.

Application to adduce further evidence

It remains to consider the respondent’s oral application to adduce further evidence.
At the hearing on 7 October 2011 we received the respondent’s oral application to adduce further evidence and subsequently made orders granting the appellant leave to file written submissions in response to that application and for the respondent to then file and serve any further written submissions in response. The appellant filed written submissions on 21 October 2011 and the respondent filed her response on 28 October 2011.
The further evidence sought to be adduced comprised a letter dated 6 October 2011 from the appellant’s solicitor enclosing a bank cheque for $82,000 payable to the respondent and an amended Itemised Costs Account in the total amount of $148,243.15.
As a result of the order made by the trial judge in the substantive proceedings setting aside the costs agreement and the costs assessment order, the appellant was obliged to prepare a new bill of costs and refund the difference to the respondent. The cheque and the amended Itemised Costs Account comprise the outcome of that exercise.
Senior counsel for the respondent said in oral submissions that these documents “buttress” submissions made by the respondent to the trial judge as to the offers to settle the substantive proceedings made by the respondent, and support the dismissal of the appeal.
The application to adduce this further evidence is opposed.
Given our findings as to the grounds of appeal we consider that it is unnecessary to address this application. The further evidence does not go to the challenge raised in Ground 7, and it cannot remedy the errors that emerge from Grounds 3, 4 and 5. Thus we propose to dismiss the oral application.

Conclusion

We have found that there is merit in Ground 7, and that there is merit in some aspects of Grounds 3, 4 and 5.
As to the latter we confirm that although her Honour appears to have inappropriately taken into account some matters in determining that indemnity costs are justified, we consider that the strength of the remaining circumstances clearly support that finding, and thus the errors that her Honour did make should not result in the appeal being allowed.
As to Ground 7, to repeat, we consider that it was not open to her Honour to in effect make one order and then make a different order albeit by way of enforcement. We propose to deal with that error by allowing the appeal in part and then varying the order by excising the second sentence.

Costs

At the conclusion of the hearing we received submissions from senior counsel for the parties as to costs.
In the event that the appeal was successful the appellant sought a costs certificate pursuant to the provision of the Federal (Costs Proceedings) Act 1981 (Cth). The respondent likewise sought a certificate in that event.
If the appeal was dismissed, the respondent sought an order for costs. The appellant made no submission in that event but we will proceed on the basis that that application is opposed.
It is apparent here that neither party has been wholly successful (or unsuccessful). We have allowed the appeal against the form of the order made by her Honour, but that issue did not take up much time at the hearing and was not the subject of extensive written submissions. It was Grounds 3, 4 and 5 which took up the time of the parties and this court and, as can be seen, we have found that her Honour erred in some respects but not such as would result in the appeal being allowed.
Section 117(1) of the Act governs costs and provides that each party pay their own costs. However, that is subject to sub-section (2) which allows the court to order costs where there are circumstances that justify that outcome.
The discretion conferred by s 117 is a broad one, and the factors in s 117(2A) to which the court must have regard should not be read in a restrictive way (Collins & Collins (1985) FLC 91-603). Any one of the factors referred to in

s 117(2A) may be the sole foundation for an order for costs (Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at 130). Paragraph (g) in particular, enables the court to have regard to such other matters as the court considers relevant.
What we have said in paragraph 96 above in our view entitles the respondent to an order for costs on a party and party basis.

I certify that the preceding ninety-nine (99) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Faulks DCJ and Strickland J) delivered on 29 August 2012.

Associate:

Date: 29 August 2012