Gissing and Sheffield (No 2)
[2013] FCCA 921
•25 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GISSING & SHEFFIELD (No.2) | [2013] FCCA 921 |
| Catchwords: PRACTICE AND PROCEDURE – Whether the substantive proceedings should be transferred to the Family Court. |
| Legislation: Federal Circuit Court of Australia Act1999 (Cth), ss.39, 39(4) |
| Gissing & Sheffield [2012] FMCAfam 1111 Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 Kohan & Kohan [1993] FLC 92-340 Munday & Bowman (1997) 22 FamLR 321 Nemeck & Jump (2010) FamCA 2012 Penfold v Penfold (1980) 144 CLR 311 Latoudis v Casey (1990) 170 CLR 534 Cassidy v Murray (1995) FLC 92-633 PBF (as child representative for AF (Legal Aid Commission of Tasmania)) v TRF& Anor [2005] FamCA 158 Prantage & Prantage [2013] FamCA FC 105 |
| Applicant: | MR GISSING |
| Respondent: | MS SHEFFIELD |
| File Number: | MLC 2548 of 2012 |
| Judgment of: | Judge O'Sullivan |
| Hearing date: | 25 July 2013 |
| Date of Last Submission: | 25 July 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 25 July 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Robinson |
| Solicitors for the Applicant: | Mathews Family Law |
| Counsel for the Respondent: | Ms Carter |
| Solicitors for the Respondent: | Carew Counsel Pty Ltd |
THE COURT ORDERS
The respondent pay the applicant’s costs fixed in the amount of
$19,927.50 within 30 days herein.
BY CONSENT THE COURT ORDERS
Until further order the respondent, whether by herself or her servants and agents be restrained from:
(a)selling, alienating, disposing of, encumbering or otherwise dealing with any asset in her name or the joint names of the parties or any company on trust controlled by the respondent, other than in the ordinary course of business without the written consent of the solicitors for the applicant or court order;
(b)incurring any liability or expense other than in the ordinary or usual course of business without the written consent of the solicitors for the applicant or court order.
Pursuant to section 39 of the Federal Circuit Court of Australia Act1999, these proceedings be transferred to the Melbourne Registry of the Family Court of Australia to be listed with such priority as that Court deems appropriate.
All extant applications otherwise be dismissed and removed from the Pending Cases List.
IT IS NOTED that publication of this judgment under the pseudonym Gissing & Sheffield (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 2548 of 2012
| MR GISSING |
Applicant
And
| MS SHEFFIELD |
Respondent
REASONS FOR JUDGMENT
These reasons for decision concern costs and other issues arising from proceedings between Mr Gissing (“the applicant”) and Ms Sheffield (“the respondent”).
The background to these proceedings is set out in Gissing & Sheffield [2012] FMCAfam 1111. For the reasons set out therein on 18 December 2012 the Court made the following orders:
“THE COURT DECLARES:
1.That pursuant to section 90RD of the Family Law Act 1975 (Cth) the applicant and the respondent were in a de facto relationship which commenced in 1995 and concluded in March 2010.
THE COURT ORDERS:
2.The proceedings be adjourned for mention on 14 February 2013 at the Federal Magistrates Court of Australia at Melbourne commencing at 10.00 am.
3.The applicant shall file and serve submissions in relation to whether the proceedings be transferred to the Family Court of Australia by not later than 4.00 pm on 31 January 2013.
4.The respondent shall file and serve submissions in relation to whether the proceedings be transferred to the Family Court of Australia by not later than 4.00 pm on 7 February 2013.
AND THE COURT NOTES:
A.That for the purposes of paragraphs (3) and (4) herein the parties shall also email submissions in word format to the Associate of FM O’Sullivan at:
(omitted)”
Subsequently on 15 January 2013 the respondent filed a notice of appeal in relation to the orders made for the reasons in above mentioned decision.
On 30 January 2013 the applicant filed an application in a case seeking costs and submissions in accordance with order [3] in paragraph 2 above.
On 11 February 2013 the following orders were made by consent:
“BY CONSENT THE COURT ORDERS THAT:
1.The mention listed on 14 February 2013 be vacated.
2.The mention be adjourned on a date to be fixed pending the outcome of the notice of appeal filed on 15 January 2013.”
On 7 June 2013 (and after the respondent had discontinued the appeal) these proceedings were listed for mention on 19 June 2013.
On 19 June 2013 both parties were represented and the Court made the following orders:
“THE COURT ORDERS THAT:
1.The Applicant shall file and serve written submissions in relation to his application in a case seeking costs filed 30 January 2013 by not later than 4.00 pm on Wednesday,
3 July 2013.
2.The Respondent shall file and serve written submissions in reply by not later than 4.00pm on Wednesday, 17 July 2013.
3.The Applicant’s costs of this day be reserved and the question of costs will be determined on the adjourned date.
4.The proceedings be adjourned for hearing on Thursday,
25 July 2013 at the Federal Circuit Court of Australia at Melbourne commencing at 10.00 am.
AND THE COURT NOTES:
A.Pursuant to orders (1) and (2) herein both parties shall email their submissions in word format to the Associate to Judge O’Sullivan at: (omitted)
B.Both parties consent to the proceedings being transferred to the Family Court of Australia on the adjourned date.
C.In the event of non compliance by any party with the orders, directions, Rules or Regulations of this Court relating to:
i.the filing of documents;
ii.the payment of any applicable filing, setting down, mediation or enforcement fee or fees; and/or
iii.any other procedural issues,
the application may be struck out, the proceedings may be directed to proceed undefended or the trial date may be vacated and the Court may direct that a further date not be fixed until all parties have complied with the said orders, directions, Rules and Regulations.
D.To the extent that it is or may be practicable to do so, a compliance check is to be carried out by an Associate or Deputy Associate of the trial Judge, or by another appropriate court officer, shortly prior to the final hearing date.”
Background
In order to understand the application for costs it is necessary to set out some of the relevant background.
The applicant is aged 49, is self employed and lives in (omitted).
The respondent is aged 65 and is a (omitted) and lives in (omitted).The applicant filed an initiating application on 22 March 2012.
The matter was first listed in the duty list on 1 May 2012. On that occasion both parties were represented. The Court made orders for reasons given ex tempore including that the respondent file a response, affidavit and financial statement and (pending an interim hearing on whether the Court should make a declaration pursuant to s.90RD of the Family Law Act 1975 (“the Act”) that a de facto relationship existed), that the respondent was restrained from dealing with certain property.
The matter was fixed for interim hearing on 7 June 2012 and the applicant’s costs were fixed and reserved.The respondent filed her response, 5 affidavits and a financial statement on 29 May 2012. The matter returned to the Court on
7 June 2012. On that occasion the applicant made an oral application (without objection) for an adjournment. For reasons given ex tempore the Court ordered that the proceedings be adjourned to 9 August 2012. Orders were made in relation to discovery and for the filing of material and both parties costs were fixed and reserved.
Both parties then filed further affidavit material and the matter returned to Court on 9 August 2012 for hearing on the issue of whether or not there should be a declaration of a de facto relationship between the parties pursuant to s.90RD of the Act.
The hearing commenced on 9 August 2012. Mr Robinson of Counsel appeared on behalf of the applicant and Mr Howe of Counsel appeared on behalf of the respondent. The hearing continued on 10 August 2012. The matter was adjourned part heard to 15 October 2012 and continued on 16 October 2012. At the conclusion of the evidence, Counsel for each of the parties made submissions and the Court reserved its decision.
On 18 December 2012 and for the reasons set out in Gissing & Sheffield [2012] FMCAfam 1111 the Court made the declaration referred to in the orders in paragraph 2 above and adjourned the proceedings.
Pursuant to the orders of 19 June 2013, on 3 July 2013 the Applicant filed submissions in relation to costs. On 16 July 2013 the Respondent also filed submissions in relation to costs.
On 25 July 2013 Counsel for the parties made oral submissions supplementing those referred to above.[1]
[1] The parties were only able to rely on material that had been filed in accordance with the orders of 19 June 2013
Orders sought
The applicant sought that the Court make the following orders:
“a.That within 7 days the Respondent pay to the Applicant the sum of $83,647.53 by way of indemnity costs of and incidental to the proceedings arising from the Initiating Application filed on 22 March 2012 and the Response filed on 29 May 2012 relating to the question of whether or not the parties were in a de facto relationship;
b.That the Respondent pay the Applicant's costs of and incidental to his Application in a Case filed on 30 January 2013 on an indemnity basis;
c.Such further or other Orders as this Honourable Court deems appropriate.”
The respondent sought that the Court make the following orders:
“a.Pursuant to sec. 117(1) of the Family Law Act 1975 (FLA), each party should bear his/her own costs and there should be no order as to costs.
b.Alternatively, the question of costs should be reserved to the trial Judge.
c.If an order for costs is to be made in favour of the Applicant, costs should be on a party/party basis and not an indemnity basis.
d.Payment pursuant to any costs order should be stayed until after the final hearing and determination of the property settlement proceedings between the parties.”
Application for costs
The normal rule in proceedings under the Act is that each party pay their own costs (s.117(1)). However, the Court may make an order for costs if it is satisfied that in the particular circumstances of the case it should do so.
Section 117(2) of the Act provides that in an appropriate case the Court may make an order for costs against one or other parties notwithstanding the general rule in s.117(1). Section 117(2A) of the Act sets out the factors to which the Court shall have regard when considering an order for costs.
“In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.”
The High Court in Penfold v Penfold (1980) 144 CLR 311 has said that the wording of that section does not create an onus on either of the parties and that it is a matter for the Court in each case to consider, having regard to the matters in section 117(2)(A) of the Act, whether in a particular case to exercise discretion to order costs or not to order costs.
The authorities also make it clear that an order for costs is compensatory, in the sense that, it is awarded to indemnify the successful party against expense to which he or she has been put by reason of the legal proceedings (see Latoudis v Casey (1990) 170 CLR 534; Cassidy v Murray (1995) FLC 92-633).
In PBF (as child representative for AF (Legal Aid Commission of Tasmania)) v TRF & Anor [2005] FamCA 158 the Full Court (per Kay, Warnick and Boland JJ) referring to s117(2A) said at 130:
“A number of factors are then listed in the subparagraphs. The financial circumstances of each of the parties to the proceedings is the first mentioned factor. Nowhere in subs (2A) or elsewhere in s117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”
Finally s.117(2) of the Act requires a finding of “justifying circumstances” as an essential preliminary to the making of an order for costs.
Consideration of the application
I now turn to deal with the factors set out above having regard to the written and oral submissions made by each of the parties in respect of those matters.
The financial circumstances of each of the parties
The applicant submitted that:
“4.The financial position of the Applicant is very poor.
5.The Applicant is self-employed in an (omitted) business which is currently making a loss. He is in receipt of New Enterprise Incentive Scheme payments of approximately $250 per week from the Department of Education, Employment and Workplace relations. He holds a low income Health Care Card.
6.The significant assets of the relationship, including all of the real property, are registered in the name of, or are otherwise in the possession and/or control of the Respondent.
7.The Respondent continues to work in the (omitted) business of the parties and to retain all income generated by it.
8.All of the rental income generated from the other assets of the relationship, namely a commercial (omitted) and residential investment properties, is received and retained by the Respondent.
9.There is no basis to believe the Respondent would be unable to meet any Costs Order made against her. Whilst it is not for the Applicant to prove to the Court the Respondent's financial circumstances, on the basis of the matters deposed to in her Financial Statement filed on 29 May 2012 the Court can be comfortably satisfied to the requisite standard that the Respondent would have the financial capacity to meet any Costs Order.”
The respondent submitted:
“6.The Applicant, very competently represented, has elected not to put before the Court any contemporaneous evidence of his financial circumstances. His only Financial Statement in these proceedings was filed on 22 March 2012, more than 15 months ago.
7.Reference is made in the Applicant’s Costs Submissions filed on 3 July 2013 to “significant assets of the relationship” being registered in the name of, or otherwise in the possession and/or control of the Respondent and “all of the rental income generated from the other assets of the relationship” being received and retained by the Respondent (at [6]). However, in Stanford v Stanford [2012] HCA 52 at [39]-[40], the High Court stated:
39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
40. Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
8.It is submitted that the aforesaid dicta of the High Court are equally applicable to sec. 90SM as they are to sec. 79 of the FLA.
9.However, given the possibility that an order under sec. 90SM might be made at trial, the financial circumstances of the parties may change hereafter. The assets and the income of the Respondent, to which the Applicant refers and upon which he places weight, may change such that his asset and income position may increase and that of the Respondent may decrease.
10.Accordingly, if (contrary to the Respondent’s primary submission) the Applicant’s costs application is not dismissed, the question of costs should be reserved to the property trial Judge, when the parties’ respective financial circumstances will have been determined.”
The respondent in submissions noted the applicant had not put before the Court any “contemporaneous” evidence of his financial circumstances. However the respondent’s own submissions sought to refer to matters which were not in evidence.[2]
[2] See claim in paragraph 31 as to only being able to meet any order for costs by selling property, also see footnote 1
Moreover the respondent’s submissions effectively conceded the gravamen of the submission made on behalf of the applicant in relation to this factor (i.e. the respondent vis-à-vis the applicant is in a better financial position). Whilst there was a claim made on behalf of the respondent in submissions that she would have difficulty meeting an order for costs this does not of itself lessen any justification for ordering costs but is a factor to be taken into account.
In the circumstances and on the evidence before the Court, I am not satisfied this factor precludes an order for costs.
Whether either party is in receipt of legal aid
Neither party made any submissions on this factor. This is not a relevant consideration.
Conduct of parties to proceedings
The applicant submitted that:
“Conduct of the Applicant
10.There can be no meaningful criticism of the conduct of the Applicant in this matter. The only matter the subject of any potential comment is the Applicant's failure to file affidavit material for the hearing on 7 June 2012 pursuant to orders made on 1 May 2012. The Applicant's failure to do so however was due to the Respondent's late filing of substantial material to which the Applicant was required to respond. The material ultimately filed by the Applicant was substantial in nature and bore out his position that it could not have been prepared within the reduced time frame.
Conduct of the Respondent
11.The Respondent sought to place in issue the Applicant's credibility on the basis of allegations of previous dishonest behaviour. The Court found that upon a testing of the Applicant's credibility, notwithstanding any previous dishonest behaviour, the way in which he gave his evidence, and the supporting documentation entered as exhibits, led the Court to prefer his evidence to that of the Respondent (refer paragraphs 39 and 40 of the judgment delivered by Federal Magistrate O'Sullivan (as he then was) on
18 December 2012 ("the judgement")).
12.The conduct of the Respondent has significantly increased the costs incurred by the Applicant.
13.The first return date of the Applicant's Initiating Application was 1 May 2012. The Respondent failed to file answering documents and accordingly the matter was adjourned to
7 June 2012. The Orders dated 1 May 2012 provided for the Respondent to file answering documents on or before
24 May 2012 and for the Applicant to file any further material on or before 5 June 2012. The Applicant's costs of $2,800 were fixed and reserved.
14.The Respondent filed a large volume of answering material on 29 May 2012 and served it upon the Applicant's solicitors on Thursday 31 May 2012. The Applicant attempted to arrange with the Respondent for the hearing on 7 June 2012 to be administratively adjourned so as to avoid incurring unnecessary costs of appearance. The Respondent did not reply.
15.At the hearing on 7 June 2012 the Applicant applied for an adjournment on the basis that he had insufficient time to respond to the Respondent's documents, in particular in circumstances where the Respondent and or/her agents had removed the Applicant's personal documents to South Australia (as deposed to in the affidavit of Mr M filed on 29 May 2012). The hearing was adjourned to 9 August 2012 and the costs of each party were reserved. The amount of costs fixed on behalf of the Applicant ($3,668) is based upon the amounts set out in the affidavit of Ms N filed on 5 June 2012.
16.The Applicant was put to the expense of proving what should have been conceded facts in the proceedings. For example:
a.As deposed by the Applicant in his Affidavit filed 22 March 2012 he had attempted to enter into settlement discussions with the Respondent and was forced to issue proceedings seeking a declaration as to the existence of the relationship when she denied the existence of same.
b.The Respondent's position as set out in her Response filed on 29 May 2012 was not made in good faith and, in light of the finding that a 15 year de facto relationship had existed between the parties, the Respondent's position ought to be presumed to have been based upon some ulterior motive or a wilful disregard of the known facts.
c.To refute the Respondent's spurious denial of the existence of the de facto relationship the Applicant was required to produce a very large volume of documents (resulting in 24 exhibits) and to call a large number (5 in addition to himself) of witnesses.
17.The Respondent unnecessarily prolonged the proceedings by:
a.Presenting as an unreliable witness. The Court found that her credibility "….was called into question by her own behaviour in and her evidence before the Court which was not only inconsistent on many occasions but on important issues before the Court in this case found wanting" (refer paragraph 42 of the judgment) and that she was overall "a very unsatisfactory witness" whose evidence "[o]n too many occasions…strained the bounds of credulity…" (refer paragraph 71 of the judgement). The Court further found that "… the [Respondent's] response to such questions about fundamental matters like bank statements is so absurd as to defy belief…" (refer paragraph 81 of the judgement).
b.Presenting as an uncooperative witness. Examples of this can be found in the judgment as follows:
(i) At paragraph 73: "The Respondent's oral evidence before the Court was lacking in detail and had a sense of unreality to it."
(ii) At paragraph 75: "The Respondent's evidence in cross examination was either evasive, unresponsive or characterised by grudging admissions."
(iii) At paragraph 76: "[parts of the Respondent's evidence] combined to reinforce the impression she either wasn't being straight with the Court or was determined to ignore the reality of the relationship."
(iv) At paragraph 78: "[the Respondent made]...repeated attempts to avoid answering direct questions…"
(v) At paragraph 81: "To put the matter bluntly on too many occasions the Respondent, when confronted in cross examination…became insolently mute. This unfortunate tendency left the impression that the Respondent in her evidence before the Court refused to answer any question which she believed would not assist her case."
c.Calling a large number of witnesses (6 in addition to herself) many of whose evidence was evidence was "prepared to support the Respondent's case and transparently so." (refer paragraph 109 of the judgement). The evidence of the Respondent's witnesses was variously described as follows:
(i) At paragraph 92: "left the clear impression it had a rehearsed quality to it…"
(ii) At paragraph 93: "smacked of a claim of recent invention designed solely to buttress the Respondent's claims"
(iii) At paragraph 98: "not…satisfactory…"
(iv) At paragraph 99: "appeared to be deliberately obtuse…"
and "did not advance her case" (refer paragraph 109). In contrast, the Court found that the Applicant's witnesses' "evidence had the ring of veracity to it" (refer paragraph 109).
d.Despite "repeated warnings to the Respondent that she was not to discuss her evidence with her other witnesses" (refer paragraph 90 of the judgment), she continued to do so during both the August and October 2012 hearing dates.”
The respondent submitted:
“11.The Respondent’s lawyers are constrained in their ability to respond fully to the Applicant’s submissions in relation to the conduct of the parties and, in particular, the alleged conduct of the Respondent, in circumstances where neither her present solicitors or counsel appeared at the jurisdictional trial and her file is retained by her former solicitor pursuant to an asserted lien. The Respondent has been unable to pay her former solicitor and procure her file. The Applicant has caused caveats to be lodged upon all the real properties registered in her name.
12.Whilst adverse findings of credit were made against the Respondent and her witnesses, the Court nevertheless acknowledged (and the Respondent refers to and repeats and relies upon) the matters in paragraph 4 hereof.
13.Further, the Court stated (inter alia):
a.“The way in which the applicant gave his evidence compared to the respondent, and the supporting documentation that became exhibits lead me to, not without some hesitation, prefer his evidence to that of the respondent” (RFJ [40]).
b.“…the Court has reservations about accepting the applicant’s evidence…” (RFJ [49]).
14.It will also be recalled that, notwithstanding the Court’s preference of the Applicant’s evidence over that of the Respondent, on 9 August 2012 two Certificates were issued under sec. 128 of the Evidence Act 1995 (Cth) for the protection of the Applicant regarding evidence given in the proceedings by him concerning his claims to Centrelink and his applications to Victoria Legal Aid.
15.Insofar as the Applicant asserts in his Costs Submissions that:
a.the conduct of the Respondent has significantly increased the costs incurred by him [12];
b.he was put to the expense of proving what should have been conceded facts in the proceedings [16]; and
c.the Respondent unnecessarily prolonged the proceedings [17]
such assertions are not conceded. Further, in this regard, the Respondent refers to and repeats and relies upon the matters in paragraph 4 hereof.”
In submissions made on behalf of the respondent it was contended her lawyers were “constrained” in their ability to respond “fully” to the applicant’s submissions in relation to this factor and did not concede what was described as the applicant’s assertions.[3]
[3] See paragraph 15 of the respondent’s submissions
I accept the submissions made on behalf of the applicant that the “conduct” of the respondent’s “dilatory” attendance to the proceedings increased the costs incurred by the applicant.[4]
[4] See for eg. paragraphs 13-15 of the applicant’s submissions
I am satisfied this factor supports an order for costs.
Whether proceedings necessitated by failure to comply with court orders
There were no submissions that specifically addressed this factor.
Whether any party has been wholly unsuccessful
The applicant submitted that:
“18.It is submitted that the Applicant has been entirely successful and the Respondent wholly unsuccessful in the proceedings.
19.The Respondent had no option but to take the course he did and as such costs should follow the event.
20.It is submitted that this factor is of fundamental importance in determining the basis on which an Order of Costs should be made.”
The respondent submitted:
“16.The submission at [18] of the Applicant’s Costs Submissions that he has been entirely successful and the Respondent has been wholly unsuccessful “in the proceedings” is incorrect. To date, the Applicant has only been successful in relation to the jurisdictional threshold issue.
17.However, the mere fact that a party has been wholly successful or unsuccessful (whether in relation to a discrete issue or overall) is not sufficient to found an order for costs. Insofar as the Applicant submits that, because he has been entirely successful and the Respondent has been wholly unsuccessful:
a.“costs should follow the event” (at [19]); and
b.“this factor is of fundamental importance in determining the basis in which as Order of Costs [sic] should be made” (at [20]) –
such submissions are incorrect and not in accordance with legal principles. Rather, the Court is directed by sec. 117(2A) to have regard to all of the matters therein specified. See Penfold v Penfold (1980) FLC 90-800 and I v I (No. 2) (1995) FLC 92-625.”
The respondent in submissions noted the “mere fact” that a party has been successful is not sufficient to make an order for costs. The respondent in submissions conceded the applicant was successful on the issue that occupied the hearing before the Court (i.e. whether the parties were in a de facto relationship).
In the circumstances I am satisfied this factor supports an order for costs.
Were there any parties to the proceedings who made an offer in writing to settle the proceedings
The applicant submitted that:
“21.No offers of settlement of this preliminary part of the proceedings are relevant to this application.”
The respondent made no submissions in relation this factor. This is not a relevant consideration.
Any other matters as the Court may consider relevant
There were no submissions specifically made in relation to this factor. This is not a relevant consideration.
Should an order for costs be made
The substantive issue in dispute that the parties asked the Court to deal with was whether they were in a de facto relationship. The authorities make it clear an order for costs is compensatory in the sense it is award to indemnify the successful party against expense to which he or she has been put by reason of the proceedings.
In light of the consideration of the s.117(2A) factors, I am satisfied there are justifying circumstances for an order for costs.
Should an order for indemnity costs be made?
Given the conclusion reached above and the orders sought by the applicant, it is necessary to consider the approach to an order for indemnity costs. The principles to be applied in determining whether an indemnity costs order is to be made are set out by Sheppard J in Colgate Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248 at 256-257:
“In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course…namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice.”
In Kohan & Kohan [1993] FLC 92-340 the Full Court qualified that:
“…the circumstances justifying the departure should be of an exceptional kind.”
In Munday & Bowman (1997) 22 FamLR 321, Holden CJ provided some examples of such exceptions.
Whilst by no means an exhaustive list, it demonstrates the seriousness of the situation that the court must accept as existing before the court can consider whether a matter falls within an exception to justify the making of an indemnity costs order.
In Prantage & Prantage [2013] FamCAFC 105 the Full Court dealt with an appeal against a costs order made on an indemnity basis.
In their Honour’s views, the trial judge understood but questioned the settled law relating to indemnity costs. They held the discretion miscarried in apparently not applying the settled law. The Full Court said:
“76.The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised.
77.This Court recognised in Kohan (supra) that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said, at 79,605:
it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should 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 s117(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.
78.The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:
When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.
79.At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”. We consider citation of authority to this effect would be otiose, so well accepted is the proposition.” (emphasis added)
Submissions on indemnity costs
The applicant submitted that:
“22.The effect of the Order sought by the Applicant would be to require the Respondent to pay his costs on an indemnity basis.
23.The sum sought in paragraph 2(a) of these submissions is made up of costs reserved on 1 May 2012 and 9 August 2012 and actual costs otherwise incurred by the Applicant in relation to these proceedings as set out in the Affidavit of Ms N filed on 30 January 2013.
24.It is acknowledged that the Court "should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind'' (see Kohan and Kohan (1993) FLC ¶92-340 at p 79,614 per the Full Court of the Family Court; Yunghanns v Yunghanns (2000) FLC ¶93-029 at pp 87,470-1).
25.The principle underlining an award of indemnity costs is that there must exist some "special or unusual feature in the case to justify the court in departing from the ordinary practice", being on a party/party basis. Those principles arise from Colgate Palmolive Co v. Cussons Pty Ltd 118 ALR 248. The circumstances described include misconduct which causes a loss of time to the Court and other parties, where proceedings were commenced or continued for an ulterior motive, the undue prolongation of a case, or wilful disregard of known facts and clearly established law.
26.Holden CJ in Munday v Bowman (1997) FLC ¶92-784 at p 84,660, drew from the decision of Sheppard J in Colgate-Palmolive, supra, examples of circumstances warranting the exercise of the discretion to award costs on an indemnity basis:
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). The Applicant says that this is the case in these proceedings;
b.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 of Australia, 5 March 1993). The Applicant says that this is the case in these proceedings.
27.The categories of cases in which an award of indemnity costs may be appropriate are not closed and in Yunghanns v. Yunghanns (2000) FLC 93-029, the Full Court, Lindenmayer, Holden and Mullane JJ said (at paragraph 31):
“It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed and that it is not a condition precedent to the exercise of the discretion that some collateral purpose of species of fraud be established against the party against whom such an Order is sought”.
28.The Full Court has further considered indemnity costs in Limousin v. Limousin (2007) Fam CA 1178 (at paras 41-49 inclusive) and in Fennessy v. Gregorian (2009) FLC 93-399 at paras 53-73 inclusive.
29.It is acknowledged that the mere existence of facts and circumstances capable of warranting an order for costs on an indemnity basis, does not mean that the Court is obliged to exercise the discretion to make such an order, as costs ultimately remain to be exercised in the discretion of the Court having regard to the factors in s 117(2A) (per Sheppard J in Colgate-Palmolive, supra).
30.It is further acknowledged that before exercising the discretion to make an order for indemnity costs, the Court should be aware of the terms of any costs agreement between the party in whose favour the order is to be made and their lawyers. The Applicant is the signatory to a Costs Agreement with Mathews Family Law. The terms of that Costs Agreement were annexed to the Affidavit filed by Ms N in these proceedings on 30 January 2013. Thus, the Court can be satisfied that the Applicant has contracted out of the Family Law Rules.
31.The conduct of the Respondent in relation to these proceeding is referred to in detail under s.117 (2A)(c) above (refer examples provided at paragraphs 11 to 17 inclusive) and ought to be seen as conduct engaged in for the ulterior purpose of unnecessarily prolonging the proceedings and thereby exhausting the Applicant financially (the Respondent well knowing his financial position) in the hope that he would abandon his application. In particular, the Respondent:
a.Failed to file responding material prior to the first return date, resulting in an adjournment;
b.Failed to file and serve responding material in a timely manner and did not co-operate with the Applicant in seeking an administrative adjournment of the hearing on 7 June 2012, causing the Applicant to be unable to file and serve his further material in time for that hearing, resulting in the matter being further adjourned;
c.Pursued a position that was untenable, as borne out by the decision made;
d.Pursued a position contrary to facts which were within her knowledge and ought to have been conceded, namely that the parties had co-habited during the course of an intimate relationship; had been engaged in a sexual relationship; had shared joint personal finances; and had made joint decisions about the purchase and sale of personal assets;
e.Presented as an unreliable and uncooperative witness;
f.Called a large number of witnesses whose evidence was intended only to advance her case without proper regard to the factual circumstances of the parties' relationship;
g.Continued to discuss her evidence with witnesses during the proceedings, despite numerous warnings.
32.The Respondent's conduct as set out herein ought not be tolerated, and should be the subject of appropriate sanction, namely that an indemnity Costs Order be made in such that the Applicant is not out of pocket.
33.The Respondent's Appeal and subsequent withdrawal of same is indicative of her conduct being designed to intimidate the Applicant into abandoning these proceedings.
34.In Fraser v Moedt, unreported, 30 October 1997, the Full Court of the Family Court held that the wife "should not have to bear the cost consequences of the husband's intentional tactics'', given that the husband's "behaviour may be described as having been intentionally obstructionist''. The Applicant submits that this is similar behaviour to that engaged in by the Respondent, which unnecessarily increased the costs of the parties.
35.The Applicant further relies on the general discussion as to costs and indemnity costs in particular in D and D (Costs) (No.2) 2010 FamCAFC 64 and says that he has passed the test for an orders for costs on an indemnity basis, and further that such costs should be fixed in support of which he relies on the decision of the Full Court in Jamine and Jamine (Costs) 2010 FamCAFC 191.
The respondent submitted:
“18.If, contrary to the submissions hereinabove, the Court in its discretion proposes presently to make a costs order in favour of the Applicant, it is submitted that costs should only be ordered on a party/party basis and not on an indemnity basis.
19.In Prantage v Prantage [2013] FamCAFC 105, the Full Court of the Family very recently unanimously allowed an appeal against an indemnity costs order. Thackray and Ryan JJ (with whom Murphy J concurred) delivered the principal (and detailed) Judgment.
20.The authorities to which the Applicant refers in relation to indemnity costs must be considered in the light of the decision of the Full Court in Prantage v Prantage.
21.In Prantage v Prantage, at [77]-[86], Thackray and Ryan JJ considered “the settled law relating to indemnity costs”:
76.The law relating to indemnity costs has been well established in this jurisdiction for many years, a fact the trial Judge himself properly recognised.
77.This Court recognised in Kohan [(1993) FLC 92-340] that there is nothing in the Act which inhibits the making of an order for indemnity costs. However, while acknowledging there is a discretion “in an appropriate case” to make an order for indemnity costs, the Full Court also said, at 79,605:
it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure from the normal standard, but also that the Judge should 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 s117(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.
78.The Full Court, when re-exercising the trial Judge’s discretion in Kohan, also said, at 79,615:
When considering what is just in this case, one must bear in mind that a party who enters into a costs agreement should be warned and must anticipate in this jurisdiction that each party might well have to bear his or her own costs, and that even if an order for party and party costs is made, the difference between party and party costs and costs payable under a costs agreement may consume all, or a substantial part, of the property order. In this particular case, the wife changed her solicitors in August 1990. It must then have been apparent to her, or at least to her new solicitors, that this might become drawn out litigation and that a rate of costs which amounted to three times the scale, exposed the wife to great risks. If she was willing to assume these risks, it does not seem just to saddle the husband with them. If they were not explained to her, she might have her own remedies.
79.At the time Kohan was decided, there was no mention of indemnity costs in the Rules. This is no longer the case, as will be seen from our recital of the Rules earlier. It will also be noted that the requirement for the Court to be informed of the terms of the relevant costs agreement has now been enshrined in the Rules. Notwithstanding this formal recognition of indemnity costs, this Court and trial Judges in this jurisdiction have routinely followed Kohan in holding that indemnity costs orders are to be seen as “a very great departure from the normal standard”. We consider citation of authority to this effect would be otiose, so well accepted is the proposition.
80.We know of one attempt in another jurisdiction to move away from the “usual rule” that costs are awarded on a party and party basis. In Marks v GIO Australia Holdings Ltd (1996) 137 ALR 579, Einfeld J gave reasons why the “usual rule” should no longer apply in the Federal Court of Australia.
81.The views expressed by Einfeld J were the subject of prompt criticism by the Full Court of the Federal Court in Re Wilcox, Ex parte Venture Industries Pty Ltd [1996] FCA 1942; (1996) 72 FCR 151, where Black CJ said at 153:
Recently, in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128, Einfeld J expressed the view that it was wrong to begin any consideration of costs by reference to a usual rule. Rather, he considered, the question of costs should be determined on its merits without any usual rule or preconception as to the costs issue (see at 133). Other judges, however, have continued to follow the established approach (see, for example, MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236) and it was recently applied by a Full Court in McHattan v Saramoa Charters Pty Ltd (unreported, Federal Court, Full Court, 17 September 1996). Moreover, one of the difficulties with any different approach is that O 62 of the Federal Court Rules 1979 (Cth), the costs order, proceeds on the footing that in the ordinary case costs will be ordered on a party and party basis. This is now reinforced by the provisions of O 23, r 11(4). Order 23 provides for the making of offers of compromise and, in specified circumstances, r 11(4) provides for a presumptive entitlement to costs on a party and party basis up to and including the day an offer was made and for indemnity costs after that day. Another difficulty with any departure from the established approach, an approach described by Sheppard J in Colgate-Palmolive (at 233) as “entrenched”, is the uncertainty that a different approach would involve.
It may be that on some future occasion a Full Court will nevertheless be asked to reconsider the basis upon which indemnity costs orders in this Court should be made, but no such invitation was extended in this case and the present application for indemnity costs should be considered in accordance with the well established principles discussed by Sheppard J in Colgate-Palmolive and summarised by Hill J in John S Hayes.
82.Cooper and Merkel JJ went further in their joint judgment in Re Wilcox. They said at 156-157:
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 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] FCA 536; (1993) 46 FCR 225.
The recent decision of Einfeld J in Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 has cast doubt on these principles. In Marks, after discussing s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA) and a number of policy considerations in relation to costs, Einfeld J concluded (at 133):
“The matter of the interaction of ‘the usual rule’, particularly as affects indemnity costs, with the statutory regime of the Federal Court Act is one which in my most respectful opinion requires fresh attention. An interpretation which I believe to be more in keeping with such a statutory provision is that the court is to start with no ‘usual rule’ or preconceptions as to the costs issue. Rather, the question of costs, like other aspects of the case, will fall to be determined on its merits. This means that the applicant for indemnity costs must put forward all of the circumstances which suggest that the most [r]igorous order should be made.”
In the light of that conclusion it is desirable that we set out our views on the manner in which the court's jurisdiction to award indemnity costs ought to be exercised.
Until Marks the principles enunciated in Colgate-Palmolive and generally applied in the Court were:
1. Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially.
2. In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable:
(a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
(b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
(c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.
83.Cooper and Merkel JJ went on to consider relevant provisions of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 1979. Having done so, their Honours said, at 158:
As was pointed out by Sheppard J in Colgate-Palmolive, the costs for which these rules provide are costs on a party and party basis. The rules do not deal with the award of costs on any other basis. Although the gap between actual costs and the scale rate used in determining party and party costs may be increasing, it is relevant to note that the criterion in r 19 in respect of the items for which costs may be recovered allows recovery of all such costs, charges and expenses as appear to the taxing officer:
“to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party ... ”
...
The rules apply unless otherwise ordered. The very fact and terms of the relevant rules suggest to us that, unless the justice of the particular case requires or some special or unusual feature arises, the rules should not be departed from by the making of some other order for costs in exercise of the jurisdiction conferred under s 43 [of the Federal Court Act]. The generality of the criteria for departing from the usual rule ensures that the discretion to depart from the rule can be exercised whenever the Court is of the view that after applying the criteria to the facts of the particular case, it is just to do so. Such an approach is consistent with the requirement that the discretion to award costs is to be exercised judicially.
However, there are other reasons for continuing to apply the principles that have been generally applied in the Court.
As was also pointed out by Sheppard J in Colgate-Palmolive, for the reasons discussed by him, the ordinary rule in favour of party and party costs, has been settled practice in the courts in England and Australia over a very long period of time. It is not readily apparent why that practice should be changed. It may well be that the scale rates, rather than the principles, require review.
Further, a general discretion of the kind suggested by Einfeld J is likely to give rise to greater disputation over costs than already exists, with possible inconsistency within the Court and between courts. Such outcomes do not advance and are not in the interests of the administration of justice.
The combination of these factors leads us to the view that the principles enunciated in Colgate-Palmolive as stated above ought to continue to be applied in the Court.
84.Our research shows that the Federal Court has continued to apply the “usual rule” that costs are payable on a party/party basis. See Boyapati v Rockefeller Management Corporation (No 2) [2008] FCA 1375, at [29] to [31], where Kenny J referred to the many cases where the rule has been applied in the Federal Court. We observe also that the rule was applied (and Re Wilcox was cited with approval) by this Court in Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225 at [13] per Boland, Thackray and O’Ryan JJ.
85. The same rule is applied in the Supreme Courts of:
·New South Wales (see Michos v Council of the City of Botany Bay (No 3) [2012] NSWSC 1465 at [7]);
·Victoria (see State of Victoria v Grawin Pty Ltd [2012] VSC 157 at [24]);
·Queensland (see Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc (t/as East Coast Apprenticeships) v Group Training Assoc Qld and Northern Territory Inc [2013] QSC 87 at [16]);
·South Australia (see Kenneally v Pouras & Ors [2007] SASC 303 at [13]);
·Tasmania (see Hayward v Forest Practices Tribunal (No 3) [2004] TASSC 14 at [6]); and
·Western Australia, where in Re Malley SM; Ex parte Gardner [2001] WASCA 83, a bench of five Judges held that a special costs order (another description for an indemnity costs order) will only be made in exceptional circumstances.
86.It will accordingly be seen that if the trial Judge purported to depart from the “usual rule”, he would not only have declined to follow settled authority in this Court, but also authority applied in all other superior courts in Australia.
22.At [87]-[90], Thackray and Ryan JJ considered “did the trial Judge depart from settled authority?”:
87.There can be no doubt that the trial Judge understood the settled law relating to the ordering of costs on an indemnity basis. There can also be no doubt that his Honour is of the view that the law requires reconsideration. He said so at [45] and [47]. However, in those paragraphs, his Honour was careful in the way in which he couched his opinion, saying only that the dicta in Kohan “probably need to be reconsidered” and that the court “needs to contemplate whether there is a change occurring in the community about costs”.
88.Furthermore, there are other parts of his Honour’s reasons in which he appears clearly to accept that he is bound by the existing law. Thus, his statement at [52] that the “categories of indemnity costs are ... clearly not closed” contains within it acceptance of the proposition that facts need to be found which bring a case within the exceptions to the “usual rule”.
89.However, our reading of the judgment as a whole leads us to conclude that it would be unsafe to proceed on the basis that his Honour did apply the settled law. Three examples will suffice:
· At [40], in referring to the judgment of Callinan J, his Honour says the “principle” does not arise in the Family Court. It is not altogether clear what “principle” his Honour had in mind, but it appears he was referring to Callinan J’s statement that orders for indemnity costs should “only occur in an exceedingly rare situation”;
· At [46], his Honour said “it defies commonsense” that scale fees are “the benchmark” in circumstances where little control is exercised by the Court over fees charged by experts;
· At [53], his Honour said that “costs should be assessed on an indemnity basis because to do otherwise would defeat the purpose of compensating the wife for the reasonable costs she incurred”.
The reference to “the purpose” can be seen as an indication that his Honour proceeded on the basis that a party is prima facie entitled to compensation for the reasonable costs they incur, which is not the law. We accept his Honour may have been referring to costs awarded under s 117AB; however, he had earlier properly observed that s 117AB does not provide that “once a finding of lying is made, all costs flow to the innocent party”.90.These examples, together with the statements made by his Honour seeking to distinguish the position in the Family Court from that prevailing in other courts which apply the “usual rule” satisfy us that his discretion miscarried.
23.At [91]-[98], Thackray and Ryan JJ considered “should the existing law be reconsidered?”:
91.In Nguyen v Nguyen [1990] HCA 9; (1990) 169 CLR 245 it was put beyond doubt that intermediate courts of appeal may depart from their own earlier decisions. The extent to which an intermediate court of appeal regards itself as free to depart from previous decisions is a matter of practice for the court to determine for itself. Where an intermediate court of appeal holds itself free to depart from earlier decisions, it should do so, as was pointed out in Nguyen at [269]:
cautiously and only when compelled to the conclusion that the earlier decision is wrong. The occasions upon which the departure from previous authority is warranted are infrequent and exceptional and pose no real threat to the doctrine of precedent and the predictability of the law ...
92.It can be seen that this approach promotes certainty in the application of the law and discipline in its development. It facilitates the doctrine of precedent and brings with it the consequence that decisions of an intermediate court of appeal will be binding on single judges within the same court hierarchy (Transurban City Link Ltd v Allan [1999] FCA 1723; (1999) 95 FCR 553).
93.Consistent with these principles, there have been occasions when this Court has departed from an earlier decision. However, as Fogarty J pointed out in Farnell & Farnell (1996) FLC 92-681 at 83,071, “where the previous decision relates to a matter of practice which has been uniformly acted upon in the intervening period so as to develop expectations that will continue to be the case, it may be unsettling to [overturn the decision]”.
94.We recognise that the Rules now expressly refer to orders for costs on an indemnity basis. We recognise also that the rules in this Court are not precisely the same as those in other courts; however, there is nothing in the Rules which indicates that the fundamental principle applied in other jurisdictions should not also be applied in this jurisdiction. Indeed rule 19.18 makes clear that the “default” position is that costs are awarded on a party/party basis.
95.As we have pointed out, the “usual rule” relating to the basis upon which costs are ordered in this jurisdiction is well entrenched. We consider it would be most unsettling if we purported to depart from the existing practice. Furthermore, we would not consider it desirable to do so, essentially for the reasons given by Cooper and Merkel JJ in Re Wilcox (supra).
96.In particular, we respectfully agree with Cooper and Merkel JJ that there are “two seemingly irreconcilable objectives” at stake. Placing great emphasis on the importance of one objective, namely “relieving a successful litigant from the burden of costs which that litigant should not have been required to incur” will inevitably lead to insufficient emphasis being placed on the importance of the other objective of “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”.
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 this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
24.At [99]-106], Thackray and Ryan JJ considered “other matters relevant to indemnity costs”:
99.Apart from his general treatment of established authority relating to indemnity costs, there are other more specific matters in the trial Judge’s reasons which, in themselves, would persuade us that the appeal should be allowed.
100.His Honour’s statement, at [50], that Sheppard J’s emphasis in Colgate-Palmolive was “on parties who must have or should have known their approach was simply imprudent” does not, in our view, accurately reflect the law as explained in Colgate-Palmolive and other cases dealing with indemnity costs.
101.It is true, as the trial Judge noted, that Sheppard J included in the list of situations that might give rise to an order for indemnity costs “the imprudent refusal of an offer to compromise”. However, in our view, imprudence by a party in “their approach” is not sufficient to enliven the power to award indemnity costs.
102.It is important in this context to recognise, as Lindgren J did in NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] FCA 480; (2001) 109 FCR 77 at [56], that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation”.
103.Lindgren J went on to point out (original emphasis):
Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant. But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.
104.We accept that it could be argued that a party’s conduct as a parent and their conduct as a litigant are intertwined. Nevertheless, we have difficulty in accepting his Honour’s statement, at [50], that a failure to foster a parent’s relationship with a child or a refusal to work with a “social scientist” to repair a relationship could themselves lead to an order for indemnity costs. These are matters that seem to us to relate to a party as a parent, not as a litigant.
105.However, we do accept that the imprudent refusal of an offer to settle on terms that involved a party attending on a “social scientist” to help repair a fractured relationship might provide some basis for a costs order, especially if combined with a party giving evidence, later found to be false, denying their own part in the “fracture”. Furthermore, failure to comply with an order to attend therapy, which then led to further litigation, might be a material matter, as it relates to behaviour as a litigant, as well as behaviour as a parent.
106.Whilst it seems undoubtedly correct, on his Honour’s findings, that the husband should have behaved differently as a parent, there was no indication in any of the material before us that the husband, for example, rejected an offer of settlement that would have allowed the children to remain living with him on an interim basis whilst family therapy was undertaken. This was the order the trial Judge made in December 2010, and was closer to the position adopted by the husband than it was to the position adopted by the wife, who proposed the children be removed from the husband. See Prantage & Prantage [2011] FamCA 481 at [12] to [14].
25.In the result, Thackray and Ryan JJ (with whom Murphy J concurred) allowed the appeal, re-exercised the discretion and held that it was appropriate a costs order be made but stated (at [143]): “We are not persuaded that the costs we propose to order should be calculated on anything other than a party and party basis”.
26.It is submitted that, on any view, the matters referred to at sub-paragraphs (a), (b), (e), (f) and (g) do not, by their nature and/or on the authorities, support an order for indemnity costs.
27.The gravamen of the Applicant’s submission in support of indemnity costs appears to be contained at paragraphs 26(a)-(b) and 31(c)-(d) of his Costs submission, namely that the Respondent allegedly a position that was:
a.untenable “as borne out by the decision made”; and
b.contrary to facts “which were within her knowledge and ought to have been conceded”.
28.However, this ignores the aforesaid statements by the Court that (inter alia):
a.“Determining whether two people have lived together in a de facto relationship for the purposes of the Act is not always straight forward. This was an unusual relationship” (RFJ [2]).
b.“The applicant’s mother agreed in cross-examination that for a relationship that was over 16 years, only seeing the respondent once was strange” (RFJ [57]).
c.“… the evidence led over the course of the jurisdictional hearing made it plain this was an unusual relationship …” (RFJ [107]).
d.“The duration of the parties association in its various forms over that time and notwithstanding its various iterations is supportive of there having been a de facto relationship” (RJF [145]).
e.“This was an usual (sic) relationship …” (RFJ [184]).
f.“There are, however, other factors which favour the respondent’s view that the relationship did not take on the characteristics of a de facto relationship. They include:
a) the lack of public recognition of the de facto relationship;
b) lack of children or registration of the relationship;
c) the dispute over the existence of the sexual relationship (RFJ [196]).
29.In the circumstances, it is submitted that there is no proper basis to seek or make an order for indemnity costs.”
The nub of the submissions made on behalf of the applicant in support of an order for indemnity costs appeared to be based on conduct by the respondent.[5] Counsel for the applicant in response to submissions made on behalf of the respondent maintained the applicant’s conduct should not be looked at from the point of view of an “outsider”. Counsel referred to inter alia the conduct of the applicant for this purpose reaching its “nadir” in relation to her evidence and that of one of her witnesses.[6]
[5] See paragraphs 31-33 of the applicant’s submissions
[6] See paragraph 17(d) of the applicant’s submissions
In submissions filed on behalf of the respondent reference was made to inter alia the decision in Prantage & Prantage [2013] FamCA FC 105. The respondent in submissions made on her behalf opposed the claim by the applicant for an order for indemnity costs, pointed to inter alia the decision in Gissing & Sheffield [2012] FMCAfam 1111.[7] The respondent maintained there was no proper basis to make an order for costs on that basis.
[7] See paragraphs 28 of the respondent’s submissions
Conclusion on application for costs
Notwithstanding the submissions made on behalf of the applicant, given the “embryonic”[8] jurisprudence in relation to s.90RD of the Act, I am not satisfied the respondent’s position in opposing the application in the substantive proceeding was “plainly or obviously unmeritorious”. There has been no finding that the respondent lied. Whilst as referred to in Gissing & Sheffield [2012] FMCAfam111, this was unusual relationship. I am not satisfied the justice of the case requires or there are special or unusual features of the case that would justify a “very great departure from the normal standard” for costs.
[8] See Barry & Dalrymple (Costs) [2011] FamCA 365 at [25]
In light of the consideration of the s.117(2A) factors and the finding of justifying circumstances, the Court clearly has the power to make an order for costs calculated in accordance with Division 21.2 of the Federal Circuit Court Rules 2001 (“the Rules”).
There are no circumstances that warrant the matter being determined on any other basis than in accordance with Schedule 1 of the Rules. The appropriate order is that the applicant has his costs calculated in accordance with Schedule 1 of the Rules. To save further unnecessary costs under Rule 21.02(a), it is appropriate for the Court to set the amount and time for payment.
There have already been orders made fixing and reserving the applicant’s costs in relation to the hearing on 1 May 2012 and 7 June 2012. There was no suggestion these weren’t calculated on the above mentioned basis. Given this and bearing in mind a measure of estimation is required, I don’t believe it is appropriate to make another order for a separate stage event or an amount by way of preparation for hearing. I will however allow the costs of the applicant by way of the daily hearing fee and advocacy loading for what was the jurisdictional hearing in August and October 2012. There are also the applicant’s costs of 19 June 2013 and today. The matter was adjourned so the respondent could address the application for costs in written submissions. In the circumstances I will allow a half day in total.
Stage of Matter
Amount
1 May 2012
$2,800
7 June 2012
$3,668
9 & 10 August 2012 plus 50% advocacy loading for each day
$5,982
15 & 16 August 2012 plus 50% advocacy loading for each day
$ 5,982
19 June 2013 & 25 July 2013 ½ day hearing plus 50% advocacy loading
$1,495.50
Total Costs
$19,927.50
The respondent had sought an order seeking that for any order as to costs to be stayed until determination of the property settlement proceedings between the parties. The basis for this appeared to be that it was only at that stage that the “parties respective financial circumstances will have been determined”[9] and the claim the respondent may have to sell property to meet any costs order (for which there was no evidence). This ignores the nature of the hearing and the raison d’être for an order for costs.[10]
[9] See paragraph 10 of the respondent’s submissions
[10] See paragraph 45 above
The respondent has already commenced an appeal which was subsequently abandoned. Beyond the submissions referred to, there were no submissions made or evidence addressing the relevant factors necessary to enliven the Courts’ discretion to grant a stay. In the circumstances, (and given the jurisdictional nature of the hearing and that the parties agree the substantive proceedings should now be dealt with in the Family Court), I am not satisfied it is appropriate to stay any order for costs. Given the submissions as to the timeframe to pay the applicant’s costs, I will order that costs calculated above be paid within 30 days. There is no evidence to indicate the respondent couldn’t make any necessary adjustments to meet such an order in that time.
Transfer of proceedings to the Family Court
In Gissing & Sheffield [2012] FMCAfam 1111 at paragraph 199 it was said:
“199.The substantive proceedings will be adjourned for mention on 14 February 2013. The purpose of the mention will be to consider (subject to any application that may be made by the parties) orders for the future conduct of the matter including whether the proceedings should be referred to a Conciliation Conference or private mediation. Further, given the jurisdictional hearing took 4 days the financial complexity of the asset pool and business the parties will be asked to file submissions as to whether the matter is more appropriate for hearing in the Family Court of Australia and if the proceedings should be transferred.”
On 19 June 2013 the parties agreed the proceedings should be transferred to the Family Court of Australia.
Under section 39 of the Federal Circuit Court of Australia Act1999 (“the FCC Act”) this Court may transfer a proceeding to the Family Court either on the application of a party to the proceeding or on its own initiative.
Section 39(4) of the FCC Act provides that in deciding whether to transfer a proceeding, the Court must have regard to the factors set out in the Rules.
There was a protocol entered into in respect to the division of work between the Family Court of Australia and this Court in 2010.
The protocol states that the matters that can be transferred from this Court or should be initially determined by the Family Court fall into eight specific categories. They are:
i)international child abduction;
ii)international relocation;
iii)disputes as to whether a case should be heard in Australia;
iv)special medical procedures;
v)contravention and related applications where orders have been made in the Family Court;
vi)serious allegations of sexual abuse or physical abuse;
vii)complex questions of jurisdiction or law; and
viii)if the matter proceeds to a final hearing, it is likely it will take in excess of four days of hearing time.
In Nemeck & Jump (2010) FamCA 2012 Cronin J considered the issue of the distinction between the work to be done by the two Courts.
Those proceedings involved parenting orders. The comments made by His Honour are nonetheless apposite where at paragraph 37 of that decision His Honour said:
“If there is to be any philosophical overview describing the distinction between the work to be done by the two courts, it could be said that this court should be dealing with cases require the attention of a superior court of record. That point may require consideration of whether there are forensic issues or legal issues that require unusual significant argument or determinations.”
Conclusion
At the hearing today the parties agreed in light of the declaration made in the orders of 18 December 2012 that an order in the same terms as the order of 1 May 2012 should be made until further order. However the concerns referred to in Gissing & Sheffield [2012] FMCAfam 1111 at paragraph 199 remain. It was clear to the Court during the jurisdictional hearing that these proceedings were complex. There are different business structures, business entities and several properties involved. Given the position of the parties and in light of the issues referred to this matter is more appropriate for the Family Court of Australia. I will for the above reasons, make an order, pursuant to section 39 of the FCC Act transferring the proceedings to the Family Court of Australia and I so order.
There will, for the reasons set out above, be orders as set out at the beginning of these reasons for decision.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan
Date: 25 July 2013
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