Gorman and Huffman (No 2)
[2018] FamCA 936
•16 November 2018
FAMILY COURT OF AUSTRALIA
| GORMAN & HUFFMAN (NO 2) | [2018] FamCA 936 |
| FAMILY LAW – COSTS – Where application for costs by father – Where mother’s application to Review Registrar’s Determination dismissed – Consideration of applicable principles - Where not appropriate to order indemnity costs – Where father in receipt of grant of legal aid – Where in circumstances orders made for fixed sum on solicitor/client basis |
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 19.18 |
| Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536 Collins & Collins (1985) FLC 91-603 D & D (Costs) (No. 2) [2010] FamCAFC 64 Fennessy & Gregorian [2009] FamCAFC 44 Greedy & Greedy (1982) FLC 91-250 Harris & Dewell & Harris (Costs) [2018] FamCAFC 180 Hawkins & Roe [2012] FamCAFC 77 Huffman & Gorman [2015] FamCA 317 Huffman & Gorman [2018] FamCA 712 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 Joyce & Fante [2013] FamCAFC 141 Limousin & Limousin [2007] FamCAFC 1178 Luadaka & Luadaka (1998) FLC 92-830 Parke & the Estate of the Late A Parke (2016) FLC 93-748 Penfold v Penfold (1980) 144 CLR 311 Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 |
| APPLICANT: | Ms Gorman |
| RESPONDENT: | Mr Huffman |
| FILE NUMBER: | PAC | 3882 | of | 2011 |
| DATE DELIVERED: | 16 November 2018 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | By way of written submissions last received on 25 October 2018 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Martin Street Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Soden Legal |
Orders
That the mother Ms Gorman pay the father’s costs of and incidental to her application for Review of a Registrar’s Determination in the sum of $6,250.00 within three months from this date.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gorman & Huffman (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 3882 of 2011
| Ms Gorman |
Applicant
And
| Mr Huffman |
Respondent
REASONS FOR JUDGMENT
The application for determination is the father’s application for costs arising from orders made by this Court on 12 September 2018.
Orders on that day were made as follows:
(1)That the mother’s Application in a Case filed 20 June 2018 be dismissed.
(2)That any application for costs be made by way of written submissions filed and served within one month from this date with any submissions in response to be filed and served within a further 14 days.
The mother’s application sought to review a Registrar’s determination made on 10 July 2018. These reasons assume familiarity with reasons for judgment in that application: Huffman & Gorman [2018] FamCA 712.
The mother’s Application for Review was unsuccessful.
The father makes application for an order that the mother pay his costs on an indemnity basis or as otherwise ordered by the Court.
Costs
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.
That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section. They are as follows:
a)the financial circumstances of each of the parties to the proceedings;
b)whether any party has legal aid and the terms of any grant of aid;
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 answers, 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.
In Collins & Collins (1985) FLC 91-603 (at 79,877), the Full Court described the discretion conferred by s 117 as being a “broad” one and held that the factors set out in s 117(2A) are not to be read in a restrictive way.
In Greedy & Greedy (1982) FLC 91-250 and Luadaka & Luadaka (1998) FLC 92-830, the Full Court made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters.
The Full Court in Hawkins & Roe [2012] FamCAFC 77 said:
17.With respect to the application of the section, in Penfold v Penfold (1980) 144 CLR 311, the High Court said at 315 and 316:
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117 (2) in "a clear case".
Sub-section (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised (Kent v Kent). Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
(footnotes omitted)
18.The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the judge. However, in I and I (No 2) (1995) FLC 92-625 the Full Court of this Court held that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs”. That is not to say that one single matter may not ultimately be determinative. The Full Court confirmed this in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41:
… 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 s 117, 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.
The provision relating to the calculation of costs is set out in r 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) which states:
19.18 Method of calculation of costs
(1) The Court may order that a party is entitled to costs:
(a) of a specific amount;
(b)as assessed on a particular basis (e.g. lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
It was said in Beach Petroleum NL v Johnson (No 2) (1995) 135 ALR 160 at 162 that the purpose of the rule enabling an order for costs in a specific amount, without formal assessment or taxation is, commonly with other courts, to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”.
In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 the Court said at [10] that the Court must act judicially, but that does not mean that it must exercise the power to award a lump sum in any “scientific or formulaic manner”.
Murphy J observed in Parke & the Estate of the Late A Parke (2016) FLC 93-748 at [130]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”… The process does not “by its very nature … envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”…
Indemnity Costs
The applications before the Court are applications for costs on an indemnity basis, or such other order as the Court thinks fit.
It is usual for the Court to make an order for costs on a party/party basis if an order for costs is made at all.
Rule 19.18(3) further provides that:
(3) In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party’s behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer’s conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f) expenses properly paid or payable.
The Court has jurisdiction in its discretion to make an order for costs on an indemnity basis and the purpose of such an award is to more fully or even wholly repay to a party all, or at least the majority, of their legal costs and disbursements and charges incurred in the proceedings.
The category of cases in which an award of an indemnity costs order may be appropriate are not closed and as the Full Court of the Family Court observed in Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 at [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 or species of fraud be established against the party against whom such order is sought. …
More recently, the Full Court has considered indemnity costs in Joyce & Fante [2013] FamCAFC 141, Limousin & Limousin [2007] FamCAFC 1178, Fennessy & Gregorian [2009] FamCAFC 44 and D & D (Costs) (No. 2) [2010] FamCAFC 64.
Otherwise, the principles underlying an award for indemnity costs have been classically summarised by Sheppard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited [1993] FCA 536 where his Honour, in summary, said at [24]:
…
1. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on a party and party basis. …
2. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. …
3 In consequence of the settled practice which exists, the Court ought not usually make an order for 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. …
Sheppard J made observations as to some of the circumstances which may warrant the exercise of the discretion to award indemnity costs and they included:
- false and irrelevant allegations of fraud;
- misconduct that causes a loss of time to the Court and other parties;
- where the proceedings were commenced or continued for an ulterior motive;
- the undue prolongation of a case on groundless contentions; and
- wilful disregard of known facts and clearly established law.
In Harris & Dewell & Harris (Costs) [2018] FamCAFC 180 (20 September 2018) the Full Court said (footnotes omitted):
23.In Kohan and Kohan, the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded (at [86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
24.That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation. His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
25.The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said 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.”
26.Of course, in proceedings under the Act, an overriding “usual rule” is prescribed by s 117(1), namely that each party bears their own costs. The degree of departure between that “usual rule” and a result where one party bears the totality of the other party’s costs can be seen to be all the greater.
As to the relevant considerations
The father contends that whilst there is no evidence before the Court as to the parties’ financial circumstances, he has the primary care of the children of the parties’ relationship with the mother spending very little time with those children. The mother is substantially in arrears of child support. The mother says that she has two further children in her care now aged five and 14 months. She asserts that she has substantial debts to the child support agency and Centrelink. However, there has been a previous property judgment between the parties (Huffman & Gorman [2015] FamCA 317) with significant property being divided between them.
The father for the purposes of the subject application was in receipt of a grant of legal aid. The mother’s previous grant of legal aid was terminated on 16 July 2018. Consequently, the father’s Response to the mother’s application for review of the Registrar’s determination was in effect conducted at a cost to the public purse.
The primary application before the Registrar for an order extending time for the mother to comply with orders made by Hannam J was occasioned by the mother’s own delay and that of her legal representatives. However, the application for review of the Registrar’s determination was promptly made but necessitated by the mother’s additional failure to comply with directions as to filing of documents.
As a consequence of the application for review being dismissed the mother was wholly unsuccessful.
It is readily apparent that the nature and circumstances of the application, the subject of the present costs application, is not such as would enliven the Court’s jurisdiction to order indemnity costs. However, it is to be inferred that the actual costs incurred by the father at a legal aid rate would be significantly less than costs incurred otherwise commercially in opposing the mother’s application for review.
In all the circumstances discussed above justify there being a departure from the general rule that each party pay their own costs. Otherwise, it is appropriate that there be an order that the mother pay the father’s costs assessed on a solicitor client basis of and incidental to the application for review and this application for costs. Legal Aid costs are estimated to total about $5,791.00 excluding GST. In all, costs thus would be about $6,250.00 including GST.
In the circumstances, so as to avoid costly and protracted costs assessment, an order will be made in that sum.
Orders will be made accordingly.
I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 16 November 2018.
Associate:
Date: 16 November 2018
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