Galante and Galante and Ors (No 2)
[2019] FamCA 902
•29 November 2019
FAMILY COURT OF AUSTRALIA
| GALANTE & GALANTE AND ORS (NO. 2) | [2019] FamCA 902 |
| FAMILY LAW – COSTS – Circumstances justifying order – Whether costs to be paid on an indemnity basis – Whether costs to be paid on a party/party or solicitor/client basis. |
| Family Law Act 1975 (Cth) ss 117, 117(2A) Family Law Rules 2004 (Cth) rr 19.01, 19.18(1), 19.18(3) |
| Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Hand & Bodilly [2013] FamCAFC 96 Kohan & Kohan (1993) FLC 92-340 Mansfied and Ors & Mansfield and Anor [2019] FamCAFC 186 Prantage & Prantage (2013) FLC 93-544 Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151 |
| 1st APPLICANT: | Ms Galante |
| 1st RESPONDENT: | Mr Galante |
| 2nd RESPONDENT: | Ms Dains |
| 3rd RESPONDENT: | Mr B Galante |
| 4th RESPONDENT: | Mr C Galante |
| FILE NUMBER: | ADC | 3454 | of | 2017 |
| DATE DELIVERED: | 29 November 2019 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 18 October 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Maik |
| SOLICITOR FOR THE APPLICANT: | Camena Legal |
| COUNSEL FOR THE 1ST REPONDENT: | Mr Livesey QC with Mr Jordan |
| SOLICITOR FOR THE 1ST RESPONDENT: | Jordan & Fowler Family Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Matta |
| SOLICITOR FOR THE 2ND RESPONDENT: | Gadens Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Hoffmann QC |
| SOLICITOR FOR THE 3RD RESPONDENT: | Charlton Rowley |
| COUNSEL FOR THE 4TH RESPONDENT: | Mr Hoffmann QC |
| SOLICITOR FOR THE 4TH RESPONDENT: | Charlton Rowley |
Orders
That the wife do pay the husband’s costs fixed in the sum of FIFTY THOUSAND FIVE HUNDRED AND NINETY SEVEN DOLLARS ($50,597) upon the final determination of the substantive proceedings.
That the wife pay the second respondent’s costs fixed in the sum of FORTY ONE THOUSAND AND SEVENTY ONE DOLLARS ($41,071) within ninety (90) days of the date of this order.
That the wife pay the third and fourth respondent’s costs to be determined on a solicitor/client basis as may be agreed or determined by a Registrar upon a taxation of costs.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Galante & Galante has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 3454 of 2017
| Ms Galante |
Applicant
And
| Mr Galante |
1st Respondent
And
| Ms Dains |
2nd Respondent
And
| Mr B Galante |
3rd Respondent
And
| Mr C Galante |
4th Respondent
REASONS FOR JUDGMENT
Introduction
By Amended Initiating Application filed 30 August 2019 Ms Galante (“the wife”) seeks orders for property settlement against Mr Galante (“the husband”). In addition the wife joined Ms Dains (“the second respondent”) and Mr B Galante and Mr C Galante (“the third and fourth respondents”) in their capacity as trustees for the B Galante Family Trust (“BGFT”).
The second, third and fourth respondents had not previously participated in the proceedings and accordingly by an Application in a Case filed 25 September 2019 the husband sought that the second, third and fourth respondents be disjoined. By their separate Responses filed 4 October 2019 the second, third and fourth respondents sought to be disjoined and that the Court dismiss the wife’s application for both final and interim relief against them.
On 18 October 2019 an order was made that disjoined the second, third and fourth respondents.
Consequent upon that order, the husband, the second, third and fourth respondents seek their costs and if successful, they seek that the Court should determine the quantum of costs be calculated on an indemnity basis, or in the alternative on a party/party basis.
The husband’s costs thrown away were awarded and it was reserved whether the costs would be assessed on an indemnity or a party/party basis.
The wife seeks that the husband’s costs be paid on a party/party basis.
The question of whether costs would be awarded to the joinder parties was reserved to be determined following the receipt of written submissions by the parties and the joinder parties.
By reference to the written submissions filed on behalf of the wife, it appears that the primary issue is not whether costs should be awarded in favour of the joinder parties, but if so awarded, it should be on a party/party basis.
The wife also seeks that costs should not be payable until the substantive proceedings have concluded.
The competing applications for final orders of the parties are set down for trial commencing 9 December 2019.
On 15 November 2019 the wife filed a Notice of Appeal in respect of the orders made for disjoinder on 18 October 2019. The ground of appeal is as follows:-
1.The presiding Judge erred in fact and at law to be particularised at a later date by amendment.
The orders sought in the Appeal are as follows:-
1.THAT the order dated 18 October 2019 for disjoinder be set aside.
2.THAT the application for disjoinder be listed for rehearing on a date convenient to the Court.
I do not consider that the filing of a Notice of Appeal operates as a stay of either the proceedings or the operation of the order made on 18 October 2019.
Application for costs
Pursuant to r 19.08(1) of the Family Law Rules 2004 (Cth) (“the Rules”), the respondents have applied for orders that the wife pay their costs.
The respondents also seek that the order for costs be determined on an indemnity basis. Rule 19.08(3) provides:-
A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
The method of calculation of costs is referred to in r 19.18(1) of the Rules:-
The court may order that a party is entitled to costs:
(a)of a specific 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.
Subrule 19.18(3) of the Rules provides that the Court may consider:-
(a)the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
In considering what orders should be made, if any, in respect of the respondent’s costs s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”) requires the Court to have regard to the following:-
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
Accordingly, I consider that I have a wide discretion in respect of matters relating to a potential costs order.
Should an order for costs be made in favour of the respondents?
The substantive proceedings between the parties relate to property settlement and division.
There is no agreement as to the property that will comprise the pool, but it is not contentious that there is substantial non-superannuation assets of between $2,200,000 on the husband’s case and $3,700,000 on the wife’s case together with total superannuation entitlements in excess of $3,700,000.
In addition, the wife has foreshadowed that the husband has an interest in the BGFT which has a potential worth of $2,300,000.
The equitable and legal interests of the parties in property and their separate entitlements to superannuation are substantial.
The wife seeks an adjustment of 65 per cent of the net non-superannuation assets and a split of the superannuation entitlements of the parties to equality.
I do not consider that the financial circumstances of the parties would be an impediment to an order for costs in favour of the husband and the joinder parties.
The conduct of the parties
The wife argues that the joinder application should be considered as a reasonable response to the husband’s refusal and/or failure to make full and frank disclosure of financial documents as requested.
The husband contends that his disclosure has been comprehensive and the further discovery sought by the wife are focussed on documents that either do not exist or have no apparent relevance to the proceedings.
Judgment in respect of the wife’s application for further and better discovery is delivered contemporaneously with this judgment.
The wife concedes that the husband has filed an initial list of documents and eight further versions up to 29 July 2019. A substantial quantity of further documents form annexures to the Affidavits of Mr F filed 2 and 16 October 2019.
I am not able to accept the wife’s proposition that if the husband had made full and frank disclosure then there would not have been a need for the joinder of the respondents. Given that the application was heard on 23 October 2019 the wife had an opportunity to consider whether the further documents annexed to the affidavits of Mr F rendered the joinder of parties unnecessary.
I do not consider that the conduct of the parties in respect of discovery is a relevant consideration.
The wife accepts that she has been wholly unsuccessful in her opposition to the applications for disjoinder. The wife concedes that the joinder application was misguided in that its purpose was to seek disclosure of documents from the joinder parties that she considered were relevant.
Even were that contention to be correct, the quest for discovery was an improper purpose upon which to seek to join the respondents.
No substantive cause of action was sought against the second, third and fourth respondents. Moreover, the wife’s counsel conceded that “the property that exists for division between the parties would be sufficient to satisfy the wife’s claim”.
By letter dated 29 August 2019, the husband’s solicitors forwarded correspondence to the wife’s solicitors questioning the utility of joining the joinder parties:-
We wonder why you are intending to join [the second respondent] and our client’s brother and father in proceedings. If your concern is for documents then surely this can be effected by subpoena. If the object is to ensure that the proposed third parties give evidence, then we can inform you that we are intending to call [the second respondent] and at least one of the trustees of the BGFT as part of our client’s case (noting that you would be aware that this was indicated at the Case Management Hearing before Justice Berman in April this year).
It is our client’s position that joinder is unnecessary.
The husband also put the wife on notice that if the application for joinder was proceeded with and unsuccessful, the husband would seek costs on an indemnity basis.
Similar correspondence was forwarded by the second respondent’s solicitors to the wife’s solicitors dated 29 August 2019:-
We understand that you act on behalf of [the wife] and that it is her intention to join our client to the Family Court proceedings between [the wife] and [the husband].
On our instructions, such an application is entirely without merit and an abuse of process.
In the event your client proceeds with her application, we hold instructions to accept service and oppose being joined as a third party.
The second respondent also put the wife on notice that if her application for joinder was ultimately unsuccessful they would be seeking costs on an indemnity basis.
The husband, the second respondent and the third and fourth respondents should be entitled to their costs of the wife’s failed opposition to the disjoinder applications.
Quantum of costs sought
The husband seeks that the Court quantify his costs on an indemnity basis by reference to a schedule of costs for the period 30 August 2019 to 18 October 2019 in the sum of $29,165 for solicitors fees and counsel fees in the sum of $27,265 being a total of $56,430.
The husband provides a copy of a fee disclosure document between barrister and solicitor and a terms of engagement between solicitor and the husband.
I am satisfied that the itemised schedule of costs is in accordance with the terms of engagement documents.
The second respondent seeks her costs fixed in the sum of $47,388 including counsel’s costs of $15,800.
If calculated on a party/party basis the solicitor’s costs are $18,213 and counsel fees at $13,562 totalling $31,776.
The issue to be resolved is the basis upon which the cost order is to be calculated. I am urged to fix the quantum rather than require the costs order to be determined on a taxation of costs.
Indemnity costs
The explanatory guide to the Rules has been accepted by the Court as an accurate definition of “indemnity basis”; namely:-
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.
The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 is of assistance in determining whether and in what circumstances an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said in Kohan at 79,605:-
…it is fundamental to the exercise of the 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 know what 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.
In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said at 156:-
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of the courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
In Prantage (supra) the Full Court said at 87,209:-
97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded that this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
The husband argues that the net asset pool in the proceedings is substantial. In addition, the parties have received substantial settlement sums by way of interim property with the last payment of $100,000 being received by the wife in October 2019.
The gravamen of the husband’s submission is that it would be unjust for the husband’s costs to be paid on a party/party basis given that special circumstances exist.
The husband’s position is summarised as follows:-
·That the wife’s application was futile and without utility;
·That the orders are not intended to penalise the wife but to compensate the husband given her conduct in persisting with the joinder of parties was unreasonable;
·That the wife was represented at all material times and given the submissions of her counsel that the purpose of the joinder was to pursue discovery, she must have received advice that the application for joinder was questionable;
·That at the first day hearing on 5 April 2019 the wife’s counsel was unequivocal in her submission that the second respondent would not be joined as a party to the proceedings notwithstanding the wife’s stated position that the wife considered the husband had an equitable interest in the second respondent’s Camberwell property;
·That by letter dated 29 August 2019 the husband’s solicitors advised the wife’s solicitors that the second, third and fourth respondent opposed their joinder;
·That by letter dated 29 August 2019 from the wife’s solicitors to the husband’s solicitors, the wife intended to continue with her application for joinder and foreshadowed that the wife would instruct Queens’s Counsel to attend upon any future hearing.
The second respondent argues in favour of indemnity costs. She contends the application was filed for the ulterior purpose of seeking discovery and disclosure when it must have been clear that the stated purchase was improper and as such the application for joinder had no prospect of success.
If an award of costs is not made on an indemnity basis then the Court should consider costs being determined on a solicitor/client basis.
By reference to the Full Court decision in Hand & Bodilly,[1] the effect is that solicitor and client costs will usually produce an outcome somewhere between indemnity costs and party/party costs.
[1] [2013] FamCAFC 96
The third and fourth respondents contend that a basis for costs to be determined on an indemnity basis is justified for the following reasons:-
·That the wife’s solicitors were put on notice of “fundamental defects in relation to their purported joinder of the third and fourth respondents”;
·That the affidavits of the wife and Mr Manzo did not rise to the level of evidence but rather, was speculative;
·That the wife was put on notice by correspondence and submissions of counsel of the costs consequences for the wife if she did not abandon her joinder of the third and fourth respondents;
·That the wife then filed her Affidavit of 1 October 2019 which is “replete with scandalous allegations of dishonest conduct and conduct calculated to frustrate the process of the Court including against the third and fourth respondents”.
The wife seeks to bring to account the impact of costs being assessed on an indemnity basis in respect of her financial position. She seeks to contrast her financial circumstances against those of the husband.
That argument may have some utility in respect of the husband’s application for indemnity costs, but is not available when considering the costs of the second, third and fourth respondents.
The husband does not accept that his financial position is necessarily superior to that of the wife and whilst it is likely that at present his income is significant, there is also the likelihood that his employment contract will come to an end.
The comparison of the husband’s financial circumstances may well be a barren argument in circumstances where the pool available for division is likely to be substantial. It could not be said that any order for costs could not be paid from the likely settlement sum to be received by the wife even on the husband’s case.
To the extent that the husband seeks that his costs be paid within a fixed period and not to be paid at the conclusion of the proceedings, each of the parties may well suffer some difficulty. The wife’s funds are limited and it is important that she retain the ability to be represented to the conclusion of the substantive proceedings. I am less pessimistic about the husband’s ability to retain representation to the conclusion of the upcoming trial.
I have had careful regard to the decision of the Full Court in Mansfied and Ors & Mansfield and Anor.[2] I do not consider that the disparity in the financial circumstances between the parties is such that a ready assessment can be made that the husband is wealthy and the wife is not.
[2] [2019] FamCAFC 186
Ultimately, it is a matter for the proper exercise of the Court’s discretion and I consider that the principles stated at [24] by Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd[3] to be apposite:-
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstance of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
[3] [1993] FCA 536; (1993) 46 FCR 225.
I consider that there is merit in adopting the approach of the second respondent that there is merit in the costs being assessed on a solicitor/client basis. I propose to determine the quantum of the costs of the husband and the respondents by reference to the indemnity costs as calculated subject to a reduction of 20 per cent.
I propose to bring to account counsel’s costs without reduction.
Time for payment
Given that the trial is currently listed for 9 December 2019, I propose to adjourn further consideration of the time for payment by the wife to the first day of trial. By then there will be some certainty as to whether the proceedings will run or whether other considerations are brought to bear.
It seems not unreasonable that the costs as between the husband and the wife should await the final determination of the proceedings. The same consideration should not apply to the second, third and fourth respondents. I would propose to set a time for the payment of their costs to a fixed date.
Accordingly, the wife will pay costs calculated as follows:-
The husband
·Solicitors fees $29,165
Less 20 per cent - 5,833
Balance $23,332
Counsel fees $27,265
TOTAL $50,597
The second respondent
·Solicitors fees $31,588
Less 20 per cent - 6,317
Balance $25,271
Counsel fees $15,800
TOTAL $41,071
The third and fourth respondents did not provide a schedule of costs and accordingly I am not able to determine quantum. The costs of the third and fourth respondents are to be calculated on a solicitor/client basis as may be agreed or determined by a Registrar upon a taxation of costs.
Conclusion
The proceedings are listed for final hearing to commence on 9 December 2019.
As between the parties, it is reasonable that the husband’s costs be paid upon the determination of the substantive proceedings.
The time for the payment of the second respondent’s costs will be ninety days from the date of this order.
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 29 November 2019.
Associate:
Date: 29 November 2019
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