Hadlow & Davis (No 2)
[2022] FedCFamC1F 890
•16 November 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Hadlow & Davis (No 2) [2022] FedCFamC1F 890
File number(s): ADC 3076 of 2017 Judgment of: BERMAN J Date of judgment: 16 November 2022 Catchwords: FAMILY LAW – ENFORCEMENT APPLICATION – Where the father seeks to enforce a costs order made on 4 November 2020 – Where the mother seeks for the Court to exercise its discretion to extinguish the liability or make an order that the liability need not be enforced – Where the mother contends that she is impecunious – Where the evidence does not support a finding that there is an ‘arm’s length’ transparent financial arrangement between the mother and her parents – Consideration of s109A of the Act – Where the court makes a garnishee order – Orders.
FAMILY LAW – COSTS – Circumstances justifying an order – Whether the costs should be on an indemnity or party/party basis – Consideration of s117(2A) – Where the mother concedes that the father was not wholly unsuccessful – Application dismissed.
FAMILY LAW – PARENTING MATTERS – Where the father seeks to vary the final orders in relation to time spending during the long school holiday period – Where since the final orders were made, the child has been enrolled in a private school – Where the private school has additional school holiday time – Where the final orders do not provide for the child to spend time with the father during the additional school holiday time – Orders.
Legislation: Family Law Act 1975 (Cth) ss 45A(2), 109A, s117(1), s117(2), s117(2A)
Federal Circuit and Family Court of Australia Rules 2021 rr 11.05, 11.07.
Cases cited: Kohan & Kohan (1993) FLC 92-340
Prantage & Prantage (2013) FLC 93-544
Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151
Rice & Asplund (1979) FLC 90-725
Division: Division 1 First Instance Number of paragraphs: 70 Date of hearing: 31 October 2022 Place: Adelaide Counsel for the Applicant: The Applicant appeared in person Counsel for the Respondent: Mr Childs Solicitor for the Respondent: VP Lawyers ORDERS
ADC 3076 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR HADLOW
Applicant
AND: MS DAVIS
Respondent
order made by:
BERMAN J
DATE OF ORDER:
16 november 2022
UPON NOTING THAT Ms Davis (“the mother”) is indebted to Mr Hadlow (“the father”) in the fixed sum of $20,930.07 inclusive of interest (“the sum owing”);
THE COURT ORDERS:
1.That the father serve a copy of this order on AA Pty Ltd (“AA Pty Ltd”).
2.That upon service of this order, AA Pty Ltd shall deduct by way of garnishee, thirty per cent (30%) of any amount due and owing to the mother or such other person or entity as she may nominate, until such time as the total sum owing is discharged or upon advice by the father that the parties have reached an alternate agreement.
3.That AA Pty Ltd shall pay any sum deducted, into a bank account nominated by the father.
4.That paragraph 3(c) and 3(d) of orders made 19 March 2020 be discharged and in lieu thereof the following order shall apply:
For week about time during the Christmas school holiday period such that the child shall spend six (6) nights with the father in each fortnight to commence at 9.00 am on what would have been the Saturday of the alternate weekend time in 3(b)(i), to 5.00 pm on the following Friday.
5.That the Application in a Proceeding filed 19 September 2022 is dismissed with no further order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hadlow & Davis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
Mr Hadlow (“the father”) and Ms Davis (“the mother”) are the parents of Z born 2016 (“the child”).
The following Applications are listed for final determination:
(1)Enforcement Application filed 11 March 2022;
(2)Initiating Application filed 3 May 2022 as to 3(c) of the final orders sought; and
(3)Application in a Proceeding filed 19 September 2022 (“the mother’s Application in a Proceeding”).
Background
Following a trial heard between 11 to 15 November 2019, judgment was delivered on 19 March 2020 (“the final parenting orders”). The final parenting orders provided for the future parenting arrangements for the child, summarised as follows:-
(1)That the parties have equal shared parental responsibility for the child SAVE that the mother shall have sole parental responsibility for any major issue affecting the child’s health;
(2)That the child live with the mother; and
(3)That the child spend time with the father as provided for in 3(c) and (d).
Following delivery of judgment, the father filed an Application in a Case on 15 April 2022 seeking an order that the mother and her parents pay the father’s costs of the parenting proceedings on an indemnity basis in such sum and in such proportion as the Court deems just and expedient.
Having considered the affidavit material filed by the parties, and the submissions of counsel including Senior Counsel representing the mother’s parents, the following order was made on 4 November 2020:-
(1)That on or before one hundred and eight [sic] two (182) days from the date of this order the mother do pay the father’s costs to the Trust Account of [BB Lawyers] for and on behalf of the father the sum of EIGHTEEN THOUSAND THREE HUNDRED AND FIFTY DOLLARS AND SEVENTY EIGHT CENTS ($18,350.78).
No order was made against the mother’s parents.
It is not in dispute that the mother has failed to pay the costs order either in whole or in part. The failure to do so resulted in the father filing an Enforcement Application on 11 March 2022 (“the Enforcement Application”) seeking payment of the sum of $18,350.78, as provided for in the order of 4 November 2020. The total sum owing including interest and costs is $20,930.07. The Enforcement Application has been considered by way of a financial examination of the mother on 31 October 2022.
It is apparent that the parties have a highly conflicted relationship with each other. Notwithstanding that final orders were made on 19 March 2020, the father filed an Initiating Application on 3 May 2022 (“the father’s Initiating Application”), seeking that there be substantial change to the final parenting orders.
The father’s Initiating Application was met with opposition and by Response filed 6 June 2022, the mother sought that the father’s Initiating Application be dismissed and that the Court should decree that pursuant to s 45A(2) of the Family Law Act 1975 (Cth) (“the Act”), the application has no reasonable prospect of success. The mother also sought to declare the father as a vexatious litigant. That application was abandoned however, consideration was given to whether the application of the decision of Rice & Asplund (1979) FLC 90-725 was the likely basis for the mother’s opposition.
Following judgment delivered on 30 August 2022, I dismissed the final orders as set out in the father’s Initiating Application other than proposed order 3(c) which is set out in the following terms:-
For week about time during the Christmas school holiday period such that the father’s usual fortnightly time spending shall be extended to seven nights in each fortnight such that the time shall commence at 9.00am on the Monday prior to the father’s usual Wednesday commencement time until the following Monday at 9.00am.
Given the parties were present on 31 October 2022, I considered that the father’s Initiating Application, now promoting only the order as set out in 3(c) of the final orders sought, should be heard and determined.
Counsel for the mother also sought to dispose of the Application in a Proceeding filed 19 September 2022, seeking that the father pay the mother’s costs of, and incidental to, the father’s Initiating Application, on an indemnity basis or in the alternative, pursuant to schedule 1 of the Federal Circuit and Family Court of Australia Rules 2021 (“Family Law Rules”). The mother’s counsel confirmed that on a party/party basis, her costs are in the sum of $6,669.69 although, there was some reduction for a proportion of counsel fees of $916.66 resulting in a net total of $5,774.34.
The costs sought if calculated on an indemnity basis was in the sum of $9,965.41.
The father’s Enforcement Application
The father seeks to enforce the following sum:-
Order for costs $18,350.78 Interest calculated pursuant to the Rules $1,569.79 Costs of the enforcement application whilst father was represented $1,009.50 Total $20,930.07
The mother continues to oppose the payment of the costs order and seeks that the Court exercise its discretion to discharge the order.
The mother was the subject of cross examination as part of the enforcement hearing. She relied upon affidavits filed 11 May 2022 and 4 July 2022 together with a financial statement of 11 May 2022.
The mother’s evidence is that she has no capacity to pay the amount sought by the father. She is self-employed and provides services as a financial consultant to a company known as AA Pty Ltd (“AA Pty Ltd”). She does not own any property of substance and lives in separate accommodation on her parents’ property for which she pays $800 per week for rent and board.
It appears that the mother has significant expenses principally relating to the child’s continuing enrolment in a private school with tuition fees of about $16,950 per year and similar school fees for her child from a previous relationship, Y, of about $20,000 per year.
The mother’s affidavit of 4 July 2022 annexes a tax return for the financial year ending 30 June 2021 which discloses a taxable income of $34,626.
The mother’s gross income is reduced by tax deductable business expenses of $11,103 relating to deductions in respect of a home office that the mother operates from her current residence.
The mother’s financial circumstances are set out in her financial statement filed 11 May 2022.
The mother was the subject of detailed cross examination in respect of her income and expenditure.
The mother provides consulting services to an arm’s length entity, AA Pty Ltd.
There remains considerable uncertainty as to the exact nature of the relationship between the mother and AA Pty Ltd however, it appears that there is a contract between the mother and AA Pty Ltd that she will provide consulting services on a fee for service basis.
It appears that the mother’s receipts are relatively modest, although the extent to which the mother could undertake more work is uncertain. The mother conceded that she was actively engaged in seeking alternate employment or additional consulting work for a fee but to date has been unsuccessful.
Exhibit “3” is an agreed schedule prepared by the father which sets out the various AA Pty Ltd payments received by the mother between 22 February 2021 and 11 April 2022, in the sum of $43,547. When considering the financial summary as set out in the mother’s financial statement, the mother’s total average weekly income is $1,067, offset by $880 in personal expenditure. On closer inspection, the mother’s income is boosted by government benefits of $260, maintenance of $28 from the father and $114 per week from the father of Y.
The Part G personal expenditure, sets out a payment for rent/board to the mother’s parents of $800 per week, with health insurance premiums of $50 and a minimum credit card payment of $30.
The evidence as to the payment of $800 per week for the mother’s accommodation, food and utilities, was unsatisfactory. The mother conceded that some proportion of the rent allegedly paid, was considered to be tax deductable insofar as a component of expenditure related to home office expenses.
The mother’s circumstances were further confused by reference to Part H, where the mother asserted that she paid $600 per week by way of school fees for the children to attend their private school education.
Even the most cursory consideration of the mother’s financial statement would demonstrate that an additional $600 per week to her total expenditure, would significantly exceed her total average weekly income, with the further concession that she no longer receives a parenting payment for the child.
The evidence does not support a finding that there is an arm’s length transparent financial arrangement between the mother and her parents. The mother readily acknowledged that much of her expenses and in particular, expenditure for the children’s school fees and related expenses, are paid for by her parents.
Moreover, exhibit “1” in the proceedings was a Verification Statement from the personal property securities register dated 19 May 2020, being evidence of the mother’s father having provided $20,000 to her, with the repayment of that sum being secured over Motor Vehicle 1. Subsequently, the mother decided to sell Motor Vehicle 1 to her parents, who paid her $22,300. The mother and her parents did not offset the original loan of $20,000 but rather it appears that it was either ignored or forgiven.
Bank statements shown to the mother, was evidence for significant amounts being repaid to the mother’s parents during the period that was allowed for the mother to pay the costs order to the father.
When pressed, the mother conceded that whilst her parents had been very generous in respect of their financial support towards her, they would not provide any money if it was to be used to settle or reduce the outstanding costs order in favour of the father.
The mother presented as an unreliable witness and the evidence supports a finding that the mother will do all that she can to avoid paying any money to the father pursuant to the cost order.
Legal principles
Section 109A of the Act provides for the Rules of Court relating to enforcement. Subsection (3) of the Act provides:-
(3)Subject to subsection (4), the actions in respect of a person the taking of which may be provided for by Rules of Court as mentioned in paragraph (2)(c) are as follows:
(a) the issue of a warrant for the arrest of a person;
(b) the issue of a warrant of execution against property of the person;
(c)the making of an order authorising the taking of possession of property of the person;
(d)the making of an order for the sequestration, and if necessary the sale, of property of the person;
(e)the making of an order for the attachment, by garnishment or attachment of earnings, of debts owed to the person;
(f) the appointment of a receiver of property of the person.
Section 109A(4) of the Act provides:-
A reference in paragraph (2)(c) to a failure to pay an amount is a reference to any such failure irrespective of the length of the period during which the failure has continued, and includes a reference to a failure to pay part of an amount.
Part 11.1 of the Family Law Rules provides for the enforcement of financial orders and obligations.
The general enforcement powers of the Court are set out in r 11.07 of the Family Law Rules:-
The Court may make an order:
(a) declaring the total amount owing under an obligation; or
(b)stating that the total amount owing must be paid in full or by instalments and when the amount must be paid; or
(c) if a payment of a child support liability; or
(d) for enforcement of an obligation to pay money (see r 11.05); or
(e) in aid of the enforcement of an obligation; or
(f) to prevent the dissipation or wasting of property; or
(g) for costs; or
(h)staying the enforcement of an obligation (including an enforcement order); or
(i)requiring the payer to attend an enforcement hearing; or
(j) requiring a party to give further information or evidence; or
(k) that a payer must file a Financial Statement; or
(l) that a payer must produce documents for inspection by the court; or
(m) dismissing an application; or
(n) varying, suspending or discharging an enforcement order.
Rule 11.05 of the Family Law Rules provides for:-
An obligation to pay money may be enforced by one or more of the following enforcement orders:
(a)an order for seizure and sale of real or personal property, including under an Enforcement Warrant (see Division 11.1.3);
(b)an order for the attachment of earnings and debts, including under a Third Party Debt Notice (see Division 11.1.4);
(c) an order for sequestration of property (see Division 11.1.5); and
(d)an order appointing a receiver (or a receiver and manager) (see Division 11.1.611.05(d).
I do not ignore the application made on behalf of the mother seeking that the Court exercise its discretion to either extinguish the outstanding liability or that there should be no order made to enforce the payment of the outstanding amount. The mother contends that she is impecunious, has few assets and is unlikely to be able to make any meaningful contribution to the discharge either whole, or in part, of the amount owning.
Impecuniosity is not in and of itself a basis for the Court to exercise its discretion to not enforce the order. The making of the order brought to account the provisions of s 117(1), (2) and (2A) of the Act. The apparent impecuniosity of the mother was considered as a factor but ultimately, the countervailing considerations under s 117(2A) of the Act were such that I considered a modest costs order should be made.
The mother’s evidence was unsatisfactory both as to the information in detail contained in the financial statement relied upon and the financial arrangements that exist with her parents. There is no suggestion that her parents have any liability to either assist the mother in the discharge of the outstanding costs order or that they have any obligation to do so. The involvement of the mother’s parents is relevant in that I have found that much of the mother’s financial circumstances are significantly assisted by their financial provision, both as to the education costs of the children and her personal liabilities.
The mother’s evidence was unreliable and I could not be certain as to either her income, taking into account taxation implications, and the extent of the mother’s outgoings.
The father seeks that I make an order by way of attachment of earnings payable by the mother’s principle contractor namely, AA. By reference to exhibit “3”, in the financial year ending 30 June 2022, the mother received $43,547.06. By careful assessment of the mother’s financial circumstances in particular, the arrangement that she has with her parents for the provision of a separate dwelling on their property, I consider that an order should be made attaching 30 per cent of monies payable by AA Pty Ltd to the mother.
Parenting orders
Initiating Application
By judgment delivered 30 August 2022, other than the proposed order in 3(c) of the final orders sought, the father’s Initiating Application was dismissed.
The basis of the father’s Initiating Application is that when he agreed to the educational arrangements for the child as proposed by the mother, he did not realise the extent and length of the private school’s holidays. It is not controversial that the Christmas school holiday period for the private school is between seven and eight weeks duration. As a result of the final parenting orders, paragraph 3(c) provides for the child to spend time with the father over the long summer holiday period for six nights during the second and fourth week whereas, in odd numbered years the child spends time with the father during the first and third week of the holiday period.
The result is that there is a substantial period at the end of the Christmas school holidays that, depending upon the rotation of time resuming in the New Year, the child may not spend time with the father for a period of almost four weeks.
As matters have transpired, the mother was prepared to offer a further period in even numbered years to be taken over the sixth week and in odd numbered years a further period to be taken over the fifth week of the school holiday period.
Of importance to the father, is that the time that the child spends with him over the Christmas period coincides with the arrangements that he has to spend time with two children from a former relationship. The father makes the point that if the arrangements in respect of the subject child and his other children are not synchronised, then he would be prevented from his employment for a period of up to eight weeks.
The mother is not opposed to the father’s proposition but rather is concerned that at this stage, the child is not ready to have her time extended to seven nights from the current arrangement which equates to six nights.
Upon further questioning, the mother was unconcerned that there should be any difference between odd and even numbered years. Of greater importance to her was that the child should be returned to her care some few days prior to the commencement of the new school term to enable uniforms, books and other preparation to take place.
The father was prepared to agree with the mother’s proposal other than whether the child should be returned to the mother one or more days before the commencement of school.
The father’s Initiating Application seeks the following order:-
3c.For week about time during the Christmas school holiday period such that the father’s usual fortnightly time spending shall be extended to seven nights in each fortnight such that the time shall commence at 9.00am on the Monday prior to the father’s usual Wednesday commencement time until the following Monday at 9.00am.
In effect, the father seeks that the child spend time with him from 9.00 am on Monday to 9.00 am on the following Monday to coincide with his alternate weekend time, albeit that orders 3(b)(i) and (ii) of the final parenting orders are suspended during school holidays.
I consider that there is merit in the child spending six nights in a block with the father rather than his proposal of an extension to seven nights. I accept the mother’s evidence that at present, the child displays some anxiety if the period away from her is longer than six nights. It is reasonable that the father’s time be notionally linked to the rotation of his alternate weekend time but that in any event, the father’s time will conclude at 5.00 pm on the last Friday of the school holidays should the child be in the father’s care.
Mother’s Application for costs
The mother seeks party/party costs of $5,775.03 or indemnity costs of $9,965.41 arising out of what she contends, was the failed Initiating Application.
In considering what orders should be made, if any, in respect of the mother’s costs, s 117(2A) of the Act sets out that the Court shall have regard to the following:-
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
Accordingly, I have a wide discretion in favour of matters relating to a potential costs order.
The mother’s counsel conceded that the only possible basis for a costs order is s 117(2A)(g) of the Act, on the basis that whilst the father was substantially unsuccessful in the orders he sought, it could not be said that he was wholly unsuccessful.
The only basis is that the majority of the orders sought by the father, were struck out.
It is a relevant consideration that as at 26 October 2022, the mother has incurred total fees of $21,327.81 of which $14,678.11 has been paid.
It is a curious observation that the mother’s total costs will significantly exceed the amount outstanding to the father pursuant to the order.
The mother also seeks that if a costs order is made in her favour, then it should be payable on an indemnity basis.
Legal principles
The discussion of the Full Court in Prantage & Prantage (2013) FLC 93-544 (“Prantage”), is of assistance in determining whether, and in what circumstances, an order for indemnity costs should be made. The Full Court referred extensively to the decision of Kohan & Kohan (1993) FLC 92-340 in which it was noted that, whilst there was nothing in the Act which in any way “inhibits” a consideration of indemnity costs, the following is said 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 was 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 sec 117(2A)(a), or perhaps even more as a relevant matter under (g). The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
In Re Wilcox; Ex parte Venture Industries Pty Ltd and Ors (No 2) (1996) 72 FCR 151, Cooper and Merkel JJ said:-
156.The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of 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 Company v Cussons Pty Ltd. (1993) 46 FCR 225.
In Prantage (supra) the Full Court said at 87,209:-
97. In our view, once it is recognised that ensuring access to justice is one of the key objectives of the “usual rule”, the claimed increasing disparity between scale costs and those being charged by lawyers becomes as much an argument against the awarding of indemnity costs as it is in favour of costs being ordered on that basis.
98. With respect to the trial Judge, we are not convinced that there is a great deal of difference between current “commercial realities” and those prevailing at the time Kohan was decided. It should be noted that the costs agreement in Kohan provided for a rate of payment three times in excess of the scale. However, even if there have been changes in the market place for legal services, we are not persuaded this should have any impact on the application of the “usual rule”, which seeks to balance competing public policy considerations.
(Emphasis per original)
I do not consider that the matters under consideration, were of such complexity that the Court should consider an order for costs on an indemnity basis. Given the history of this matter, it could not be said that the father’s Initiating Application was either frivolous or vexatious.
Accordingly, the issue of whether the costs should be assessed on a party/party or an indemnity basis is irrelevant in circumstances where orders made on 30 August 2022 are such that I should exercise my discretion to award costs in favour of the father.
I make orders as appear at the commencement of these reasons.
I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 16 November 2022
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