Garwood & Shipton (No 11)
[2024] FedCFamC1F 623
•17 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Garwood & Shipton (No 11) [2024] FedCFamC1F 623
File number(s): ADC 4995 of 2018 Judgment of: KARI J Date of judgment: 17 September 2024 Catchwords: FAMILY LAW – COSTS – Where the Respondent sought the primary judge be disqualified from hearing the proceedings – Where the Respondent had made three unsuccessful attempts to disqualify the primary judge – Where only the disqualification application to which the present costs application relates has proceeded to argument and judgment – Application for an indemnity costs order in relation to both the disqualification application and the costs application – Where offers were exchanged in attempt to resolve the costs application – Where the court considers there to be justifying circumstances for the making of a costs order in relation to both the disqualification application and the costs application – Where the Court is not satisfied that the all of the costs incurred were reasonable and/or proportionate – Where the Court declines to make an order for indemnity costs – Costs ordered fixed in the amount of $16,000. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17
Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Garwood & Shipton (No 7) [2023] FedCFamC1F 935
Garwood & Shipton (No 9) [2024] FedCFamC1F 350 Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664
Kohan & Kohan (1993) FLC 92-340
Munday & Bowman (1997) FLC 92-784
Shipton & Garwood (2024) FLC 94-189
Division: Division 1 First Instance Number of paragraphs: 34 Date of last submission/s: 16 August 2024 Date of hearing: In chambers on the papers Place: Darwin Solicitor for the Applicant: Mills Oakley Solicitor for the Respondent: Angela Ferdinandy Pty Ltd ORDERS
ADC 4995 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR GARWOOD
Applicant
AND: MS SHIPTON
Respondent
ORDER MADE BY:
KARI J
DATE OF ORDER:
17 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.That within sixty (60) days the Respondent do pay the Applicant’s costs fixed in the amount of SIXTEEN THOUSAND DOLLARS ($16,000) apportioned as follows:
(a)ELEVEN THOUSAND DOLLARS ($11,000) for the disqualification application; and
(b)FIVE THOUSAND DOLLARS ($5,000) for the costs of the cost application.
2.That the Application in a Proceeding filed 25 June 2024, and the Response filed 31 July 2024 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Garwood & Shipton has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
KARI J:
INTRODUCTION
These reasons relate to an application for costs made by the Applicant. The application arises from a wholly unsuccessful application of the Respondent to have Kari J disqualified from hearing the matter.
For the reasons that follow, a costs order in a fixed amount shall be made in relation to both the disqualification application and the costs of the costs application.
BACKGROUND
These proceedings have a lengthy history which is not relevant for present purposes, particularly given the narrow focus of the application for costs that has been made.
Relevantly, the application for costs has been made against the following background:
(a)The parties are currently engaged in protracted litigation regarding the parenting arrangements for their child X born in 2018, in addition to the threshold jurisdiction question of whether the parties were in a de facto relationship.
(b)The final hearing is part heard, with a trial having commenced on 5 September 2022 and proceeding for 12 days.
(c)The final hearing is set to resume on 18 November 2024 with an additional 15 sitting days allocated.
(d)There are a number of reasons that the final hearing has become protracted, which are not germane to the present dispute.
(e)Relevantly, however, on 31 January 2024 the Respondent filed an Application in a Proceeding seeking that I disqualify myself (“the disqualification application”). In addition to the order that I be disqualified, an order was also sought that a “mistrial” be declared.
(f)The disqualification application was filed shortly prior to the re-commencement of the part heard final hearing, which was then listed to resume on 5 February 2024.
(g)The disqualification application was heard on what would have been the first day of resumed part heard trial on 5 February 2024. Given the nature of the application and it going to the heart of the integrity of the trial process it was dealt with in priority, with the court hearing argument and reserving its decision.
(h)The disqualification was dismissed by orders made 27 May 2024 (Garwood & Shipton (No 9) [2024] FedCFamC1F 350).
By Application in a Proceeding filed on 25 June 2024 (“the costs application”), which was accompanied by an affidavit of the Applicant, the Applicant sought costs in relation to the disqualification application in the following terms:
1.That the Respondent mother pay the Applicant father’s costs on an indemnity basis for costs incurred as a result of the Application made by her that the Honourable Justice Kari be disqualified and a resulting Order that there be a declaration of a Mistrial.
Orders were made in chambers on 26 June 2024, which provided for:
(a)The costs application to be dealt with on the papers in chambers;
(b)The Respondent to file any responding material by 31 July 2024; and
(c)The parties to file written submissions, limited to 5 pages, by 16 August 2024.
The Respondent filed a Response and an Affidavit in support on 31 July 2024. The orders sought in the Response were:
1.That [Mr Garwood]’s Application for Costs filed 25 June 2024 be dismissed in its entirety and that there be no orders as to costs and, in the alternative if the court considers that an order for costs is warranted:
(a)that the costs be assessed on a party and party basis by way of an assessment of costs pursuant to Rule 12.17(1)(d) of the Federal circuit and Family Court Rules; or
(b)in the event costs are quantified that such costs be payable upon the conclusion of the matter at which time the various applications and cross applications for costs can be set off against each other; and
(c)in any event that any order for costs against [Ms Shipton] be payable within thirty (30) days of the making of final orders in these proceedings and upon the determination of all costs applications and cross applications.
2. That [Mr Garwood] pay [Ms Shipton]’s costs of and incidental to this Application.
(As per the original)
Each of the parties filed written submissions on 16 August 2024.
Regard has been had to those documents referred to at [5]-[8] herein, together with the documents referred to in each of the written submissions. Whilst no objections have been taken to the affidavit filed by each of the parties directed to the costs application (the Applicant’s filed 25 June 2024 and the Respondent’s filed 31 July 2024), I observe that vast portions of each affidavit (particularly that of the Respondent) is in the form of submission and argument, rather than evidence.
QUANTUM SOUGHT BY THE APPLICANT
The Applicant has quantified his claim for indemnity costs in the amount of $16,299.25, calculated as follows:
(a)Solicitor fees in the amount of $5,808;
(b)Counsel fees for Mr AM of $5,500;
(c)Counsel fees for Mr AW of $3,025; and
(d)Counsel fees for Ms AL of $1,966.25.
In addition, the Applicant seeks costs incurred and anticipated in pursuing the costs application in the amount of $15,207.50. It is however difficult to understand the estimates given by the legal representatives “going forward”. The written submissions of the Applicant did not help to clarify these amounts; other than to identify that an additional amount for Counsel fees for the preparation of written submissions in the amount of $1,100 was claimed.
THE LEGAL FRAMWEWORK
The legal framework relating to costs in proceedings under the Family Law Act 1975 (Cth) (‘the Act’) is well settled. In particular:
(a)Each party to proceedings is to bear their own costs unless there are circumstances which in the opinion of the court justify the making of a costs order (s 117).
(b)In considering whether there are circumstances justifying the making of a cost order, the court must have regard to the factors set out in s 117(2A).
(c)When considering justifying circumstances, the court has broad discretion as to the weight to be given to those factors set out in s 117(2A) (Medlon & Medlon (No 6) (Indemnity Costs) (2015) FLC 93-664 at [24]).
(d)Indemnity costs are only ordered in exceptional circumstances (see for example Kohan & Kohan (1993) FLC 92-340 and Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248).
The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) also provide assistance when considering the making of an order for costs. In particular, r 12.17(1) provides the method for the calculation of costs:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
In addition, r 12.17(3) sets out the matters that may be considered in the calculation of costs:
(3)In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c)the rates ordinarily payable to lawyers in comparable proceedings;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre-action procedures;
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
DISCUSSION
The Respondent was wholly unsuccessful in all aspects of the disqualification application filed by her on 31 January 2024. This speaks strongly in favour of the making of a cost order in relation to that application.
The Applicant correctly identified that the disqualification application was the third attempt by the Respondent to have me disqualified from hearing the proceedings. I observe however, that it is the only disqualification application that has proceeded to argument and judgment. An earlier application made by the Respondent having been withdrawn, and subject to an order for costs in favour of the Applicant (Garwood & Shipton (No 7) [2023] FedCFamC1F 935). Accordingly, the costs of this disqualification application ought be considered separately and not conflated with the earlier applications. This factor alone is not a persuasive factor for the making of a cost order on the disqualification application.
In addition, the Applicant correctly identifies that the contentions made in support of the disqualification application were a duplication of contentions made in appellate proceedings commenced by the Respondent and dismissed by the Full Court (Shipton & Garwood (2024) FLC 94-189). However, as it turned out the disqualification application was heard prior to the hearing of the appeal, and was disposed of following the disposition of the appeal. Whilst the Respondent could have chosen to withdraw her disqualification application following her unsuccessful appeal, the reality is that costs had already been incurred on the present disqualification application and would not therefore have been ameliorated. Additionally, the disqualification application was properly made before the me as the primary judge with carriage of the proceedings. I therefore do not consider this submission supports the making of a costs order on the disqualification application.
The financial circumstances of the parties have previously been considered by me in Garwood & Shipton (No 7) [2023] FedCFamC1F 935. Then, as now, the parties remain in dispute as to their respective financial circumstances. Of import, I made comment in those reasons which some ten months later remain apposite:
41While there may be conjecture between the parties about their respective financial circumstances, I am unable at this stage to make any findings in this regard.
42Taking each of the parties at face value, it is clear that they can each ill afford this litigation.
43.Whatever the case may be however, impecuniosity is not a bar to the making of a costs order.
In his affidavit filed 25 June 2024 the Applicant deposed:
(a)His income is $5,834 per fortnight, net.
(b)His rent is $1,000 per fortnight.
(c)He pays child support to his former wife in the amount of $542 per fortnight.
(d)He is borrowing funds from his mother to meet his ongoing legal fees in these proceedings, and he has no savings.
(e)He owes counsel who have appeared from him in the proceedings a total of approximately $18,342.50.
The financial circumstances of the Respondent are a little more opaque. In her affidavit filed 31 July 2024, she deposed:
(a)She has incurred costs since the commencement of the proceedings in the amount of approximately $2,283,605.
(b)She has no funds left in trust to pay for ongoing expenses; presumably no funds in her solicitors’ trust account to pay her legal fees.
(c)She has not made provision for her future legal fees, including trial fees.
(d)She is in receipt of a “section 106B LSC assignment”; although it is not clear what this means, and a copy of the grant has not been provided to the Court.
(e)The position of C Group is that it was placed into administration in 2024, and that she is “no longer able to withdraw upon any resources from the Group to fund a personal costs order.”
(f)The company has debts to the Australian Tax Office which total approximately $4,000,000, together with a debt to the Commonwealth Bank of Australia in the amount of $4,800,000.
(g)Settlement on the sale of the Group was expected within weeks of the Respondent swearing her affidavit.
(h)She has “two special needs children to care for and suffer from PTSD”.
(i)She has weekly costs which total $1,700 per week which she is currently unable to meet.
(j)The home she lives in in Town M (which is owned by a company of which she is the sole Director and Shareholder) will need to be sold, as there has been default in paying the mortgage obligations since 2024.
(k)She has “maxed out” her credit cards and is required to pay $500 per week interest.
(l)The Applicant does not pay child support in keeping with an agreement the parties made, and has otherwise paid nominal incidental expenses for X, with the Respondent otherwise solely meeting X’s costs.
(m)She supports her three older children (including her two adult children) who all live with her.
(n)She has assets in her sole name or possession valued at approximately $2,063,000, and liabilities of $1,360,509.
Neither party is presently in receipt of a grant of legal aid. The Applicant says he has borrowed significant funds from his mother to fund his litigation costs. The Respondent has funded her costs in these proceedings from drawings from her business; albeit this is no longer open to her. The significant legal costs the parties have incurred cannot be overlooked. Put simply, they are eye watering and support the making of an order for costs on both applications presently before the Court.
It is not apparent, and nor is it expected that there could have been any offers exchanged to resolve the disqualification application.
The parties depose to the offers that they have exchanged to resolve Applicant’s costs application. The Applicant has made two offers in the amount of $11,000 and $10,000. The Respondent has made an offer to settle in the amount of $2,787. That the parties were unable to find a middle ground, and further costs were incurred by each of them in arguing the costs application is lamentable. I consider the two offers made by the Applicant to be reasonable, particularly taking into account that the offers were not calculated on an indemnity basis (as sought by the Applicant in the costs application). I consider the Respondent’s offer to resolve the costs application in all of the circumstances discussed in these reasons to have been inadequate. This supports the making of an order for costs in relation to the costs application.
For all of these reasons, I am satisfied that circumstances exist which justify the making of an order for costs both in relation to the disqualification application and the costs incurred in pursuing the costs application.
In considering whether an order for indemnity costs should be made, the Applicant has referred to the summary of enlivening circumstances enunciated Holden CJ in Munday & Bowman (1997) FLC 92-784 at 84,660:
(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: see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] 81 ALR 397.
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra).
(c) Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions: see Ragatta Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, 5 March 1993)).
(e)An imprudent refusal of an offer to compromise.
(As per the original)
The Applicant contends that all of these considerations apply to the disqualification application. I do not agree.
I do however accept that properly advised, the Respondent should have known that the disqualification application had no chance of success. It was entirely meritless as ultimately found in two separate determinations.
Despite this, however, I am not prepared to make an order for indemnity costs. This is because I am not satisfied that all of the costs incurred were reasonable or proportionate. It is particularly difficult to reconcile, the costs of all three counsel in the amounts claimed.
Additionally, I am not satisfied that that all of the costs incurred or anticipated in perusing the costs application are accurate and/or reasonable and/or proportionate.
I have had regard to the fact that there were separate applications before the court during the period that the disqualification application was agitated and the overall complexity of the proceedings, which warrants Senior and Junior Counsel. However, as the Applicant himself points out, there was overlap and duplication between the disqualification application and the matters argued by the Respondent in the appeal. I consider that this overlap makes it impossible to untangle the legal costs, despite the creation of a separate file for the appeal and an alleged delineation of costs.
I therefore consider it appropriate to make an order fixing costs in the amount of $16,000 in relation to both the disqualification application and in pursuing the costs application apportioned as follows:
(a)$11,000 for the disqualification application; and
(b)$5,000 for the costs of the cost application.
The Respondent contends that if an order for costs is to be made, any payment should await the final determination of the substantive proceedings and following the determination of all costs applications and cross applications.
I do not however agree. This application is a discrete application and as such I consider it appropriate to make an order for costs to be paid within sixty days.
For the foregoing reasons, I now make those orders that appear at the commencement of my reasons.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kari. Associate:
Dated: 17 September 2024
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