Hampton and Farley and Ors (No 3) - [2013] FamCA 890

FAMILY COURT OF AUSTRALIA

HAMPTON & FARLEY AND ORS (NO 3)

[2013] FamCA 890

FAMILY LAW – COSTS – JURISDCITION – Where there are competing costs applications arising from primary proceedings for, inter alia, property settlement under Part VIIIAB of the Family Law Act 1975 (Cth) (“the FLA”) – Where the applicant in the primary proceedings (“the wife”) seeks costs against the second and third respondents – Where the second and third respondents seek costs against the wife – Where the determination of the claim brought by the second and third respondents in the primary proceedings required the invoking of the court’s accrued jurisdiction – Where the second and third respondents seek costs against the wife pursuant to the costs regime guided by s 98 of the Civil Procedure Act 2005 (NSW) (“the CPA”) and the Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”) – Where the wife seeks costs against the second and third respondents pursuant to the costs regime set out in s 117 of the FLA – Whether the court has jurisdiction to hear the competing costs applications under s 177 of the FLA given that the claim of the second and third respondents in the property proceedings was heard in the court’s accrued jurisdiction

Civil Procedure Act 2005(NSW)
Corporations Act 2001 (Cth)
Family Law Act 1975(Cth)
Federal Court Act 1976 (Cth)

Industrial Relations Act 1988 (Cth)

Judiciary Act 1903 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)

Workplace Relations Act 1996 (Cth)

Bonic v Pacific General Securities Ltd [2009] NSWSC 1221
Bryer & Bryer & Anor [2012] FamCA 884
C Pty Ltd v PGW As Liquidator of S Pty Ltd (in liq) (2011) FLC 93-485
Construction Forestry Mining and Energy Union & Anor v Director of the Fair Work Building Industry Inspectorate (No 2) (2013) 296 ALR 443
Fencott v Muller (1983) 152 CLR 570
Finlayson & Finlayson & Gillam (2002) FLC 93-121
Footes v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52
Gallieni & Gallieni & Ors [2013] FamCA 314
Hitch & Hitch (2012) 47 Fam LR 603
Jones & Anor & Markham [2010] FamCA 1026
Martin v the State of New South Wales (No 6) [2012] NSWLEC 227
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd; United States Surgical Corp v Hospital Products International Pty Ltd (1981) 148 CLR 457
Starr-Diamond v Diamond (No. 4) [2013] NSWSC 811
Skinner & Alfonso-Skinner (Costs) [2010] FamCA 1108
Telfer (as Executor for the Estate of the Late Telfer) v Telfer (No 2) [2013] NSWSC 823
Thorpe & Thorpe & Anor [2012] FamCA 719

APPLICANT:

Ms Hampton

RESPONDENT:

Mr Farley

SECOND RESPONDENT

Mr Farley (Jnr)

THIRD RESPONDENT:

Farley and Son Pty Ltd

FILE NUMBER:

MLC

116

2011

DATE DELIVERED:

13 September 2013

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Le Poer Trench J

HEARING DATE:

14 August 2013; and written submissions filed on 30 August 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Nicholson

SOLICITOR FOR THE APPLICANT:

Mr W

COUNSEL FOR THE SECOND AND THIRD RESPONDENTS:

Mr Laughton

SOLICITOR FOR SECOND AND THIRD RESPONDENTS:

McLarens Solicitors.

Orders

The reasonable expenses incurred by the second respondent in having Ms T Farley attend at the court in Sydney for cross-examination are to be paid by the wife. Such expenses are to be quantified by reference to the provision of receipts, or such like documents, which demonstrate the costs actually incurred.
The cost applications of each of the wife the second and the third respondents are otherwise dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hampton & Farley (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC

Ms Hampton

Applicant

And

Mr Farley

First Respondent

And

Mr Farley (Jnr)
Farley and Son Pty Ltd

Second and Third Respondents

REASONS FOR JUDGMENT

Introduction

The applications before the court are costs applications arising out of the determination of competing property claims between the husband and wife to a marriage and also proceedings for a declaration of trust by Mr Farley (Jnr) (“the second respondent”) and Farley and Son Ltd (“the third respondent”) against the husband. That later proceeding was not opposed by the husband however it was opposed by Ms Hampton (“the wife”). In the property proceedings, the wife also sought an order which, if granted, would have affected assets of the third respondent.
The primary proceedings were concluded by delivery of judgment on 5 April 2013. That judgment was delivered by Coleman J (now retired from the court). The final order made by Coleman J reserved costs.
Pursuant to the order for reserved costs the second and third respondents filed in the court on 19 April 2013 their submission seeking costs orders. The wife filed her submission in response on 27 May 2013, such submission also containing an application that the second and third respondents pay the wife’s costs.
The second and third respondents seek three orders against the wife for costs; each is expressed as an alternative. The orders sought are that:
a)The wife pay the whole of the costs of the claim by the second and third respondents.
b)Alternatively, the wife pay the costs of the second and third respondents thrown away by the wife requiring Ms T Farley to attend Sydney for cross-examination and then, when she was available, advising that she would not be required.
c)Alternatively, the wife pay the costs of the second and third respondents which were lost as a result of the wife seeking an adjournment to prepare written submissions in response.
The wife seeks an order that her costs in the sum of $150,958 be paid by the third respondent and that such order be an indemnity costs order.
The wife further seeks that the application of the second and third respondents for costs be dismissed.

Background Facts

The judgment of Coleman J published on 5 April 2013 sets out the facts upon which that judgment was determined.
His Honour determined an application for settlement of property pursuant to the provisions of Part VIIIAB of the Family Law Act 1975 (Cth) (“the FLA”). The applicant in those proceedings (Ms Hampton) is the former de facto wife of the respondent in those proceedings (Mr Farley).
In the judgment of Coleman J, he referred to the parties to the relationship as “the husband” and “the wife”; for the sake of convenience and in order to avoid confusion for the parties I will do the same in these reasons.
His Honour concluded that the relief sought by the wife resulted in the third respondent, a corporation owned by the husband and his son, Mr Farley (Jnr) (the second respondent), to intervene in the proceedings and seek orders in exercise of the court’s accrued jurisdiction.
At paragraph 11 of the judgment his Honour set out the declarations and the order which the second respondent sought in the proceeding. Briefly described, the orders sought were for a declaration of trust, the effect of which was that the property of the third respondent and other real estate owned by the husband be declared to be held beneficially for the second respondent. Alternate remedies were sought.
The orders of Coleman J required that the wife be paid $500,000 from the superannuation interests of the husband in the Farley and Son Pty Ltd Superannuation Fund.
On 7 May 2013 Coleman J gave directions in relation to the hearing of the competing costs application and, further, made the following order:
Pending further order of the court, upon the second and third respondents through their senior counsel making the usual undertakings as to damages, the applicant is hereby restrained from converting into cash or rolling into another superannuation fund $150,000 of the funds referred to in the splitting order made by the court on 5 April 2013.
In addition, on that same day, an order was made pursuant to a minute of order provided by the parties, such order specifying the precise declarations necessary to implement the determination of Coleman J.
The effect of the order made on 7 May 2013 was to extend the operation of order 11 made by Coleman J on 5 April 2013, providing for the payment of $800 per week by the husband to the wife until all of the orders of the court had been fully complied with.
The order made by his honour was not as extensive as that sought by the second respondent in the proceeding. The second respondent was substantially successful in his proceeding against the husband and the third respondent. The trust found by his honour to exist was subject to a life estate in favour of the husband. The extent of the trust sought to be declared by the second respondent was greater than that finally ordered so far as it related to the assets of the third respondent. To that extent, the second respondent did not succeed with his case and therefore could not be said to have been wholly successful in the proceeding.
It is common ground that the husband did not oppose the relief sought by the second respondent. The opposition to the granting of that relief came from the wife.
Relevant background information which emerges from the reasons published on 5 April 2013 by Coleman J is as follows.
The husband is 60 years of age, the wife is 63 years of age and the second respondent is 37 years of age. The relationship between the wife and the husband commenced in around 1995. At about that time, the husband and his former wife, Mrs Farley, separated. Mr Farley (Jnr), the second respondent, is the child of that relationship.
On 1 July 1996, the husband and the second respondent formed a partnership known as Farley and Son.
The wife and husband commenced cohabitation in December 1998.
On 27 January 1999, the husband transferred to the second respondent as tenants in common his half interest in a property named V.
In July 1999, pursuant to an arrangement between the husband and his former wife, the husband and the second respondent became directors and equal shareholders in the corporation Mr and Mrs Farley Pty Ltd.
Thereafter, the husband and the second respondent, either individually or through the vehicle of the third respondent, acquired further property. They also leased property. The second respondent thereafter acquired property of his own. Other property and business transactions were undertaken by the husband and the second respondent with and without the third respondent.
The discussion of the case brought by the husband, the second respondent and the third respondent is set out at [78] and following in the judgment. It refers to an agreement reached between the husband and the second respondent in 1996.
In the finality, his Honour determined that the second respondent was the beneficial owner of the real estate owned by the husband and the second and third respondents; however, such beneficial ownership was subject to a life estate for the benefit of the husband.
In this application the second and third respondents relied upon affidavits sworn by Mr Q on 6 May 2013, 15 May 2013 and 14 June 2013. They also read an affidavit sworn by Ms P on 2 July 2013. The husband did not participate in this case.
The affidavit of Mr Q sworn on 6 May 2013 sets out details of the costs incurred by the second and third respondents (his clients) in the proceedings. In his affidavit sworn on 15 May 2013, Mr Q provided further evidence in relation to the costs incurred and/or owing by the second and third respondents. That affidavit serves to establish that the costs paid at the trial and/or incurred by the second and third respondents in the proceeding amounted to $183,554.
In his affidavit of 14 June 2013, Mr Q annexed a copy of an offer of settlement made at 10.16am on 12 September 2012 by the husband, the second respondent and the third respondents to the applicant wife. The offer was for a payment of $400,000 inclusive of costs, and exclusive of payments made to the wife to that date. The offer further provided that $800 per week spousal support would continue until payment of the funds.
The affidavit of Ms P set out some history of the proceeding. Of relevance is annexure E of her affidavit, being a letter from the wife’s solicitors to the solicitors for the husband. The letter is dated 7 February 2012 and contains the following sentence: “Our client will be asserting that the assets of the company [Farley and Son Pty Ltd] are beneficially owned in their entirety by the husband.” Annexed to that letter was a copy of an Amended Initiating Application by the wife which sought a payment from the husband of $3.5 million.
Annexure F to the affidavit of Ms P is a letter dated 9 February 2013 by the wife’s solicitors to the second respondent. The letter advised of the proceeding and enclosed a copy of the Amended Initiating Application.
Annexure G to the affidavit of Ms P is a letter from McLaren’s lawyers (solicitors for the second and third respondents) to the wife’s solicitors dated 1 March 2012. That letter advised that the second respondent had a legal and beneficial interest in property which appeared to be the subject of the application of the wife. It gave notice of assertions of promissory estoppel against the husband in respect of those interests, and it contained the following sentence: “Our client has worked on the farm, in the partnership and for the company in reliance upon his father’s promise that he will inherit all of those assets on his father’s passing.” The writer then sought immediate assurance that the second respondent’s interests were noted by the wife and that no attack would be made upon them in her proceedings in the court.
The response from the wife’s solicitors dated 1 March 2012 advised that the applicant would not be seeking any orders or declarations against the second respondent. The orders she sought were against the husband. She gave notice, however, that if the amount of money ordered to be paid by the court to her pursuant to the proceedings was not paid, she would seek enforcement against property legally owned by the husband. That response ignored the assertion which had been made by the second respondent that such property was held upon trust for him.
The above history is relevant because the wife claims that she was not given any proper notice by the second respondent of his claim for beneficial ownership of the assets standing in the name of the husband until the second and third respondents joined in the proceedings shortly before the trial commenced in B Town.
In support of her application, the wife relied on three affidavits sworn by Mr W on 21 May 2013, 26 June 2013 and 9 August 2013. She also relied on an affidavit sworn by herself on 9 August 2013.
In her affidavit sworn on 9 August 2013 the wife provided the following evidence. On 7 March 2013, the wife injured herself after falling in a shopping centre in Canberra. She injured her back and has suffered pain and immobility since. She has taken medication and received medical treatment in relation to her symptoms. She has met the cost of the treatment from her own resources. The wife is left with residual symptoms which make it no longer possible for her to sit for periods exceeding 30-45 minutes, or lengthy periods of standing without movement for 30 minutes. To do so causes her to suffer pain. As a consequence, the wife now receives a pension from Centrelink. She has not made any application for compensation, however, she has instructed solicitors.
The wife has now received $350,000 in accordance with the orders of the court. Upon payment of her legal fees, she will be left with approximately $42,000 in superannuation and in $6000 in savings. Her only other assets are a motor vehicle and some furniture. There remains a payment of $150,000 to be made pursuant to the orders of the court. There are still further legal fees to pay.
The affidavit of Mr W sworn on 21 May 2013 provides the following relevant information. The legal fees and disbursements incurred by the wife in the proceedings amount to $372,739. Prior to judgment being delivered, the wife had paid $74,900 in costs. There is still outstanding the sum of $297,839.
In his affidavit sworn on 26 June 2013 Mr W annexes offers of compromise dated 12 September 2012 but which were apparently made on 13 September 2012. Relevantly, there is an offer to the husband and/or the second and third respondents to resolve the proceedings by payment to the wife of $650,000. It was to be paid in two instalments, the second of which ($300,000) was to be paid within 12 months. Spouse maintenance of $800 per week was to continue until all outstanding payment had been received.
The third affidavit of Mr W sworn on 9 August 2013 served to correct a figure which appeared in paragraph 6(a) of his affidavit sworn on 21 May 2013.

Submissions

The wife and each of the second and third respondents provided written submissions in relation to the costs questions and then provided oral submissions when the matter was listed before the court on 14 August 2013. Following that hearing, I requested that the parties provide further written submissions by email for reasons which will be discussed later in these reasons.
The first set of written submissions of the second and third respondents are based on a presumption that s 117 of the FLA will govern the court’s determination in relation to the competing costs applications. In those submissions, reference is made to the Civil Procedure Act 2005 (NSW) (“the CPA”) and a submission is made as to how the costs application of the second and third respondents may have been dealt with had the proceedings been conducted in the Supreme Court of New South Wales (“the NSW Supreme Court”).
As will be seen in these reasons, submissions relevant to s 117 of FLA and costs under the CPA and the Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”) canvass many of the same matters to inform the exercise of discretion with a notable exception, that being the statutory provision in s 117(2A) of the FLA which requires the court to take into account the financial circumstances of the parties. It is arguable that the financial circumstances of parties to costs applications is not excluded as a matter which can be taken into account by a court exercising jurisdiction under the CPA.
In their first set of written submissions, the second and third respondents make the following points.
The husband in the proceedings did not defend the suit brought by the second respondent. On 7 February 2012, in the wife’s second Amended Initiating Application, she sought an order for $1.35 million. In her submissions at trial, she sought an order for $463,000 of assets held by the husband, together with a splitting order in the sum of $537,000, thus making a total claim of $1 million. The judgment of Coleman J gave the wife $500,000, all of which was to be satisfied out of the husband’s superannuation.
The second respondent could have commenced his claim against the husband and the third respondent in the NSW Supreme Court. Had he proceeded there and been successful (which would have occurred given that the husband did not oppose the orders being sought), the provisions of the CPA and the UCPR would have applied to any costs application.
The second and third respondents addressed subsections of s 117(2A) of the FLA. The first subsection was titled “Financial circumstances of each party”. It was submitted that the court can have regard to the financial circumstances of the parties following the implementation of any property orders made by the court. It is submitted that the wife received an order in her favour requiring a payment of $500,000 to her.
Under the heading “Conduct of the parties s 117(2A)(c)” it is submitted that conduct of the proceedings by the wife does warrant the making of a costs order against her. The second respondent submits that he was successful in establishing the existence of a trust (albeit of a different nature and extent to that asserted) over the principle assets of the husband. That action was defended by the wife throughout the proceeding. It is submitted that, had the wife restricted her application to a payment of $500,000 from the husband, then there were sufficient funds in the husband’s superannuation fund to meet such a payment. In such circumstances, it would not have been necessary for the second respondent to prosecute his claim for a trust.

It is submitted that the wife displayed a tendency to advocate her case from the witness box and that such tendency prolonged the hearing. The way in which the wife failed to answer questions which really required a “yes/no” or “I don’t know” answer led to the hearing extending beyond that which was necessary.
On instruction from the wife, Mr N prepared three reports for her. Two of those were rejected by the court at B Town when it first commenced to hear the case. It is submitted that the involvement of Mr N served to prolong the trial. It produced no factual or expert evidence on which the court made any positive finding in favour of the wife.
It is submitted that all of the above matters should give rise to the making of a costs order in favour of the second and third respondents against the wife. In addition, costs are claimed in relation to the requirement of having Ms T Farley available for cross-examination in Sydney at the request of the wife. When Ms T Farley made herself available, the wife advised the court that she was no longer required as a witness. Although the costs associated with having Ms T Farley travel to Sydney for cross-examination are sought, no specific details of those costs are provided. That is not however fatal to the application for costs associated with her attendance in Sydney.
Further, the second and third respondents submit that the adjournment of the proceedings on the last day of the trial earlier than the court might otherwise have risen, which adjournment was made to enable the wife’s legal representative to prepare submissions, led to a waste of time and therefore costs being incurred by the second and third respondents.
The second and third respondents submit that the hearing of evidence concluded on Thursday 20 December 2012, after four days of trial in Sydney. There had been earlier days of trial in B Town. The second respondent was ready to proceed with his submissions, including having an outline of submission in writing. The submissions could have been completed on Thursday 20 and Friday 21 December 2012. The adjournment was granted at the conclusion of the day of 20 December 2012.
The adjournment, it is submitted, had the effect of prolonging the proceedings, and therefore required the husband to meet additional payments of $800 per week pursuant to an interim order. The payments were made to the wife as interim maintenance. It is submitted that those circumstances warrant the making of a costs order.
The second and third respondents provided a written reply to the wife’s submissions as to costs. The submissions in reply focus on the failure of the wife to accept that a trust existed between the second respondent and the husband based on an agreement reached before the husband and the wife commenced their cohabitation.
The second and third respondents submit that it was not until 11 September 2012 before Coleman J at B Town that the nature of the orders sought by the applicant wife became apparent. They refute the submission that the wife only consented to the third respondent being joined to the proceedings for the purpose of enabling the husband to make a payment by way of property settlement to the wife which might minimise the amount of taxation he might otherwise have had to pay arising from the alternate property orders which she sought. It is submitted that, on any view, the third respondent held property which the wife contended formed part of the pool of assets.
In response to the wife’s submission that, following the matter being adjourned on 13 September 2012 she was in cross-examination and therefore unable to speak to her lawyers, the second and third respondents say that the submission is nonsense. There is a convention (it is submitted) which permits, probably with the consent of all parties, lawyers to take instructions notwithstanding that their client is in cross-examination.
Submissions are made on behalf of the second and third respondents to refute the suggestion that senior counsel was not warranted in the proceedings. The second and third respondents seek costs orders as determined by the court and awarded as a lump sum, rather than requiring the process of assessment of the costs. The requirement for senior counsel (not the subject of a certification by the trial judge for assessment of costs purposes) was therefore a relevant matter to address.
In answer to the submission made by the wife that it was not necessary for the second respondent to join in the proceedings and that orders could have been sought on his behalf by the husband, it is submitted that he was entitled to join in the proceedings to protect his substantial interest. It is submitted that there was an obvious potential of conflict between the husband and Mr Farley (Jnr) and that, therefore, he properly needed to be represented in the proceedings.
It is submitted that, as the second and third respondents were not parties to the relationship between the wife and the husband, their claim for costs ought to be afforded an elevated status.
In response to the wife’s submission, the second and third respondents say that the wife did more than just put the respondents to their proof, as asserted by her in her submissions. She maintained that no trust existed and she pursued an entitlement which was in excess of the available property owned by the respondent husband.
In relation the wife engaging Mr N, it is submitted that he carried no special expertise. The fact that he resided in Perth added to the expense of engaging him as an expert on behalf of the applicant. His costs amounted to $79,000. I note that in the oral submissions, the wife advised the court that she does not seek as part of her costs any payment for Mr N’s fees.
The second and third respondents submit that the wife should have accepted the offer of settlement made on 12 September 2012, which provided for a lump sum payment of $400,000, excluding a sum of $69,000 which had already been paid by the husband on account of costs. It is submitted that the costs incurred by the applicant wife after 12 September 2012, excluding any further fees incurred by Mr N, totalled $150,958. If the costs are included, then the further fees incurred by the wife would be approaching $200,000. Ultimately, the wife achieved an award of $500,000 only; accordingly, the mathematics of her ultimate position warranting her acceptance the earlier offer can be seen.
It should be noted that from the wife’s side a similar argument is mounted, given that she said she would accept $650,000 as a settlement sum on 12 September 2012 and, ultimately, the second and third respondents and the husband expended more than $150,000 in costs on a combined basis. The further costs incurred by the second and third respondents from 12 September 2012 amounted to $90,000.
The applicant wife’s submissions, as stated earlier were provided in writing and then spoken to in further submission.
The wife submits that the first occasion on which she was provided with notice that a trust may exist in respect of the property owned by the husband with the beneficiary being the second respondent was on 2 September 2012. It was after that occasion that the second respondent was served by the wife with copies of her Initiating Application citing the orders being sought by her in the proceedings.
The wife acknowledges that on 23 March 2012 the trial judge was told that the second respondent was likely to intervene in the proceedings. The wife at the same time advised the court that she did not propose to join the second respondent and that he had been served with her application documents. At that time, a three-day hearing was listed to commence on 11 September 2012 in the B Town registry.
The trial commenced on 11 September 2012 in the B Town registry. At the time that the trial commenced, counsel entered an appearance for the second and third respondents and sought leave to intervene. The wife submits that, as she was in cross-examination when the first portion of the trial completed in B Town, this “precluded [her] from having ongoing discussions with her legal representatives pending the adjournment date.”
I note that the second and third respondents have criticised the above approach of the wife, and nowhere is it suggested that the wife’s solicitor or counsel sought permission from the court and/or the respondents to be able to have “ongoing discussions” with their client. The court notes that this type of circumstance arises not infrequently. Where it occurs, requests are made by the legal representative for a party in that situation and, as a matter of routine, the court is advised that no objection is raised by the other parties. There is understood (and sometimes explicitly stated) to be a proviso to the consent given; that proviso is that the party under cross-examination and their legal representatives will not discuss the evidence that has been given or that may be given in the future.
In her submissions, the wife justified her opposition to the orders sought by the second and third respondents because of “contradictory” positions taken by the husband in respect of his property during the course of the proceedings. The wife sets out in her written submissions various statements attributed to the husband in sworn affidavit form and otherwise during the course of the proceedings.
The wife submits that it was not until 4 September 2012, shortly before the trial commenced, that sealed copies of the second respondent’s Application in a Case and affidavit seeking to intervene were served. A ring binder of documents, being exhibits to the affidavit supporting the second respondent’s case, were received on 5 September 2012 and forwarded to counsel. Leave to intervene was granted to the second and third respondents on the first day of the trial being 11 September 2012.
The wife concedes that on 29 August 2012 she received a pleading which set out the proposed claim of the second respondent. On 30 August 2012, the wife received the husband’s affidavit of evidence in chief. The applicant points out that the second respondent had, on 23 March 2012, been given until 30 June 2012 to intervene.
The wife’s assertion that she had at no time been seeking to interfere with the “legal ownership” of any asset held by the second respondent ignores that the entitlement claimed by the second respondent was largely arising under equitable principles.
The wife points out in submissions that on 17 December 2012, being the day of the resumed trial in Sydney, the second respondent amended his case to include an alternative claim, being that the second respondent was entitled to recover a reasonable remuneration from the husband on a quantum merit basis pursuant to either the Pastoral Worker’s Award or the Transport Worker’s Award. Ultimately, it became unnecessary for the trial judge to determine that application however it was prosecuted by the second respondent.
Further, the wife submits that the costs application made on behalf of the second and third respondents must be seen as an application for indemnity costs, and that no basis for indemnity costs has been properly made out.
The wife submits that the briefing of senior counsel was not warranted. In support of that submission, it was said that senior counsel appeared without a junior. Junior counsel appeared for each of the wife and the husband. The issues involved could not have been described as complex. It was submitted that as the first, second and third respondents were, to a large degree, in the same cause, there was commonality of evidence which could have been contained in one of those parties’ cases as opposed to all three.
In relation to s 117(2A) of the FLA, the wife identifies the following matters.
The wife is 64 years of age, not currently in employment and entitled to a Centrelink Newstart Allowance of $268 per week. She is also in receipt of $800 per week as a spouse maintenance payment. That will cease upon the determination of the costs application and the ability of the husband to complete the orders made by Coleman J.
From the $350,000 which she has now received, the wife has paid $297,839 by way of costs. That sum would not include costs associated with the application currently under consideration.
The second respondent is 37 years of age and there is nothing to suggest that he is not in good health. The applicant asserts that the evidence establishes the second respondent had net assets approximately $1.6 million at the date of the trial. The husband was found to have $1.3 million in assets including superannuation. It is submitted that the second respondent’s financial circumstances are far healthier than those of the wife.
The wife contends that there are aspects of the conduct of the proceedings by the second respondent, set out in her submissions, which should adversely impact on any application by the second and third respondents for payment of costs and positively impact upon the wife’s application for costs.
The wife says that the respondent failed to comply with orders the court made on 23 Mach 2012 providing for any intervention to occur much earlier in the year than September 2012. It is further submitted that the variation in the cases put by the husband need to be taken into account when determining this costs application. The wife had no option but to put each of the respondents to their proof.
It is submitted that the ultimate judgment of $500,000 was significantly greater than the offer made by the respondents.
The wife submits that there is no case for costs arising out of the early adjournment of the proceedings at the conclusion of the trial in Sydney, as can be illustrated by transcript and, in particular, the words of the trial judge.
The wife rejects any basis upon which the costs sought in respect of Ms T Farley should be made. In the alternative, she submits that any loss sustained should be offset against the costs thrown away by the husband seeking to conclude cross-examination at 10.43am on the final day of the hearing in B Town.
In support of her application for costs, the wife says that the matter was listed for three days in B Town commencing on 11 September 2012. Had the second respondent not intervened, the case would have been determined in that time. It was available to the husband to run the case which the second and third respondents ultimately did, thus saving considerable time.
The wife seeks a costs order in the sum of $151,000 and submits that the costs should be paid by the third respondent on an indemnity basis.

Oral submissions

In the oral submissions on behalf of the second and third respondents, their counsel clarified that the order sought for costs was a lump sum of $150,000 or such other sum as the court deems appropriate.
In oral submissions, counsel for the second and third respondents reminded the court that in the hearing the wife sought an order against the third respondent for the payment of $463,000. The wife consented to the third respondent being named as a party.
The second and third respondents emphasised that the only defence to the remedy sought by the second respondent was mounted by the wife. Further, they made it clear that the wife in the orders she sought required a payment from the company in respect of which the second respondent claimed a beneficial interest. At the trial, the second respondent claimed that the whole of the company effectively belonged to him. It is therefore asserted that the second respondent was wholly successful in the proceeding brought by him against the husband.
It was submitted that the conduct of the wife, the way in which she ran the trial and the way in which she gave her evidence supports a costs application in favour of the second and third respondents. Further, it was submitted that their costs ought to be paid because of the role played by Mr N, as there were no findings as a result of any of the evidence that he gave. Two of his reports were rejected by the Court when it sat in B Town. The third report was allowed, however, the trial judge said that it was somewhat misleading.
Next, it was submitted that a costs order ought to flow to the second respondent because the wife failed to accept an offer of $400,000, clear of $65,000 which she had already been paid. The second respondent submits that the costs incurred by the wife thereafter were greater than the additional benefit gained by the order of the Court. The third respondent submitted that it was required to be represented because the wife sought orders in respect of its assets.
Counsel for the second and third respondent’s drew the court’s attention to the following words arising at [114] of the judgment and following, where the trial judge concluded:
… The wife’s evidence featured a degree of exaggeration which was largely absent from the evidence of the husband and, to an even greater extent, the evidence of the son. The latter revealed an impressive even-handedness.
The trial judge also said of the wife at [115]:
… her tendency to advocate her case from the witness box gave rise to a significant but unintended inconsistency.
And it was further said at [115]:
… Notwithstanding that reality, the wife initially appeared to be seeking to persuade the Court that the contributions of herself and the husband to [business] activities rivalled those of the son. Ultimately, as the submissions of Counsel for the husband and Senior Counsel for the corporation and the son emphasised, the wife conceded the predominant role of the son in the conduct of [business] activities.
Further, the trial judge stated as follows at [116]:
The Court is comfortably satisfied both in terms of the credibility of the husband and the son, that conversations, essentially in terms asserted by them, occurred from time to time in 1996 and the years following. The Court is not able to make an affirmative finding that the wife was ever privy to, or needed to be privy to such conversations, at least until May 2004. The circumstantial evidence, as detailed in the material facts recorded earlier in these Reasons provides support for accepting that the husband and the son had the conversations in terms alleged by them.
At [230] the trial judge said that “the Court is satisfied that the wife was able to give evidence about those matters because she had done them.” This referred to the assertions by the wife that she had been engaged in various activities. The court found, however, that “the wife had not undertaken those tasks with the frequency which, at least impliedly, her evidence suggested.” Ultimately at [232] the court noted that “as the wife conceded, the great bulk of the work on [for the business] was undertaken by the son.”
The wife made oral submissions before me. She referred to her extensive written submissions. Her counsel advised that he would not repeat those matters unnecessarily.
The wife’s opposition to the costs order being sought is that notice of the claim by the second respondent was provided at a very late stage. That did not give the wife an opportunity to properly consider the case the second respondent was bringing. Further, the wife was in the witness box and therefore had no opportunity to the test the evidence of the second respondent and the husband in relation to the second respondent’s claim until after her case had closed. Her case had still not closed when the three days elapsed which had been allocated to the hearing conducted at B Town. The wife emphasises that by orders of the Court, the second respondent was to have intervened by 30 June 2012 if he sought to participate in the proceedings. That was not done by that date and sworn evidence was not provided until 4 September 2012.
The wife points to the finding in the trial judge’s reasons that the wife was not privy to the discussions between the second respondent and the first respondent in respect of the foundation of the trust.
The wife asserted that she was not afforded the opportunity to discuss the case with her lawyers between the hearing in B Town and the hearing in Sydney because she was in cross-examination. I have already made comment in relation to that submission.

It was submitted that the wife was entitled to be suspicious of the case being made by the second respondent because of the “changing ground” evidenced by the respondent husband in the lead up to the trial in terms of what he had asserted were his assets at various times.
The wife further argued that the bringing of the “quantum merit claim” by the second respondent when the case resumed in Sydney again extended the hearing in a manner which was ultimately of no benefit. The amended application of the second respondent dated 17 December 2012 became an exhibit in the proceedings.
The applicant wife points out that the second respondent was not wholly successful in his claim. He had sought a declaration of trust in respect of property beyond that which was ultimately accepted by the trial judge. Additionally, no recognition of a life estate in the husband was sought or acknowledged in the case brought by the second respondent.
The wife again addressed the issue of whether it was necessary for the second respondent to engage senior counsel.
In relation to the wife’s claim for costs, her counsel advised the court that she accepts the responsibility for Mr N’s costs and her costs application is restricted to the additional time required following the conclusion of the hearing in B Town. Her case being that this case could have been concluded in three days in B Town.

Issues arising

When the matter commenced its hearing before me I raised with the parties the question of whether s 117 of the FLA was the appropriate statutory provision to have regard or whether s 98 of the CPA, together with provisions of the UCPR, might be more appropriate.
In the substantive proceedings before Coleman J, the claim made by the second and third respondents against the husband needed to be determined before the property proceedings between the husband and wife could be determined under s 90SM of the FLA. The action by the second and third respondents was not a claim under the FLA; it was heard by virtue of the invoking of the court’s accrued jurisdiction.
Coleman J summarised the situation in his judgment at [2]:
The relief sought by the wife resulted in [Farley and Son Pty Ltd], (hereinafter referred to as “the corporation”) which is owned by the husband and the husband’s son, Mr Farley Jnr, (hereinafter referred to as “the son”), Farley and Son, a partnership between the husband and his son (hereinafter referred to as “the partnership”) and the son in his own right intervening in the proceedings, and seeking orders in the exercise of the Court’s accrued jurisdiction.
That the claim of the second and third respondents was properly heard and determined in the court’s accrued jurisdiction was not, and is not, an issue of contention between the parties. His Honour commented in the judgment at [13]:
… Determining the property of the parties to the de facto relationship clearly involves the exercise of the Court’s accrued jurisdiction. It is common ground that the jurisdiction exists and should be exercised.
The issue which now arises is whether the competing costs applications of the parties should be heard pursuant to the regime set out in s 117 of the FLA or, alternatively, pursuant to s 98 of the CPA and the UCPR, given that the latter legislative instruments would have been applicable had the claim of the second and third respondents been determined in the NSW Supreme Court.
The steps which the Court must take when determining costs applications under the FLA are different (at least in one important consideration) to those it must take when determining costs applications pursuant to the CPA and UCPR. In the circumstances of this case, it is the Court’s view that determining the applications pursuant to these distinct approaches could, and probably would, lead to different results.

The parties’ positions as to the correct costs regime

Following the hearing on 14 August 2013, I requested the parties to provide further written submission in relation to the jurisdictional issue which had arisen and to state their respective positions as to which costs regime was applicable to their claims.
The wife submits that the correct approach for the court to take is to determine each of the competing costs applications under the costs regime set out in s 117 of the FLA.
The second and third respondents submit that the wife’s costs application against them must fail because her claim in the substantive proceedings was confined to provisions of the FLA and she made no claim against the second and third respondents in exercise of the court’s accrued jurisdiction.
In addition, the second and third respondents submit that they were not parties to “proceedings under the Act” in the substantive proceedings so no claim for costs as sought by the wife can be made against them. In their view, therefore, the only claim for costs arising from the substantive proceedings that the wife could pursue would be against the husband.
The second and third respondents further submit that their costs application against the wife should be determined according to the CPA and the UCPR because their claim in the substantive proceedings was “separate and distinct” to the proceedings between the husband and the wife, “purely equitable” in nature and, therefore, a “State only” proceeding.

Costs proceedings under the FLA

Ordinarily in proceedings under the FLA each party is to bear his or her own costs, unless the court finds that there are circumstances which justify a departure from the general rule.
Subsection 117(1) of the FLA states as follows:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
In the circumstances of the costs applications before the court, given what was said above about the determination of the claims of the second and third respondents in the court’s accrued jurisdiction at first instance, it is important to note the inclusion of the words “under this Act” in s 117(1).
The second and third respondents submit that their claim and the relief they received did not arise in “proceedings under the Act”. The wife confined her claim against all of the respondents (including the husband) to reliance upon provisions of the FLA.
Under s 117(2), the court has a broad discretion to make such orders for costs as it considers “just”, provided that there are circumstances which justify the court in departing from the general rule.
In exercising that discretion and determining whether or not an order for costs should be made, the court must take into account the factors set out in s 117(2A) of the FLA, those being as follows:
(2A) 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.
In Hitch & Hitch (2012) 47 Fam LR 603 the Full Court considered the operation of s 117(2A) of the FLA and referred to authorities which have guided this court in the application of that provision. The following was said in the joint judgment of May and Ainslie-Wallace JJ at [53]–[56]:
53.In Penfold and Penfold (1980) 144 CLR 311, the High Court described the application and purpose of this section. It was said at 315:
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".
54.As a discretionary decision, the weight to be given to a particular consideration under s 117(2A) is a matter for the judge. However, in I and I (No 2) (1995) FLC 92-625 it was 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”.
55.That is not to say that one single matter may not ultimately be determinative, as was confirmed in Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) v Fish and Another (2005) 33 Fam LR 123 at paragraph 41…
56.It is as well to recall previous decisions of this Court that a disparity in financial resources between the parties may justify an order for costs in favour of the party with fewer financial resources (Marinko v Marinko (1983) FLC 91-307, Mallet v Mallet (1984) 156 CLR 605). Also relevantly, the apparent inability of a party to pay costs is not a bar to a costs order being made in circumstances where that party’s conduct is determined to warrant an order (Cross v Beaumont (2008) 39 Fam LR 389).
Their Honours continued at [58]–[59]:
58. It was held by Evatt CJ and Gibson J in Greedy that “[a]n award of costs ought to bear some relation to the conduct of the proceedings by the parties or to their relative circumstances at the time of the application and hearing of the matter”: at Fam LR 672; FLC 77,381. It was further said (at Fam LR 673; FLC 77,382):
…There may be situations where refusal to negotiate, to make an offer or to put forward an alternative order may be a factor justifying an order for costs. The failure of a party to take part in negotiations in a genuine manner may contribute to delay and cost and obstruct the proper resolution of a matter.
59. In In the Marriage of Pennisi (1997) 22 Fam LR 249; (1997) FLC 92-774 (Pennisi) the Full Court discussed the relevance of offers to costs applications and said (at Fam LR 259–60; FLC 84,547):
The husband’s submissions refer to Robinson and Higginbotham (1991) 14 Fam LR 559; (1991) FLC 92-209 as authority for the proposition that the fact that an offer just exceeds the award is no bar to an order for costs. Equally, however, it is only one of the factors to be considered under s 117(2A) and it is not the law that an offer of greater or equivalent value to that which results from the Court will lead to an order for costs in favour of the offeror — Harris and Harris (1991) 15 Fam LR 26; (1991) FLC 92-254.
We would also add that just because an offer is marginally less than the amount ordered by a Court does not mean that it is not a factor to be taken into account in determining whether costs should be awarded.
…
We do, however, consider that the closer the offer is to the award when the offer is under the amount awarded by the Court, the more weight that should be given to this factor in considering the question of costs. This principle must not, however, be rigidly applied. Offers must be seen in the context of the case and the extent of the offeree’s knowledge of the parties’ financial circumstances while the offer is live. In the family law jurisdiction, it is not uncommon to find relationships where one party, often the wife, has significantly less grasp of the parties’ financial arrangements, or the financial circumstances are so complex that it would be premature to accept an offer. There are also cases where the contents of the offer are in themselves the subject of disputed value and legitimate subject matter for determination. These and other features of the context of offers must be taken into account when considering whether it was reasonable or not to accept an offer, no matter how close to the ultimate result the offer may be.

Costs proceedings under the CPA and the UCPR

The power of a court to make an order for costs under the CPA is set out in s 98 of that Act as follows:
98 Courts powers as to costs …
(1) Subject to rules of court and to this or any other Act:
(a)costs are in the discretion of the court, and
(b)the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c)the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a)costs up to, or from, a specified stage of the proceedings, or
(b)a specified proportion of the assessed costs, or
(c)a specified gross sum instead of assessed costs, or
(d)such proportion of the assessed costs as does not exceed a specified amount.
(5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act 1996.
(6) In this section, costs include:
(a)the costs of the administration of any estate or trust, and
(b)in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and (c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.
Section 98 operates subject to the UCPR, specifically Pt 42 thereof. The relevant rules in Pt 42 are as follows:
42.1 General rule that costs follow the event …
Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
42.2 General rule as to assessment of costs …
Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.
42.3 (Repealed)
42.4 Power to order maximum costs …
(1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.
(2) A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party:
(a)has failed to comply with an order or with any of these rules, or
(b)has sought leave to amend its pleadings or particulars, or
(c)has sought an extension of time for complying with an order or with any of these rules, or
(d)has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap:
(i) progress of the proceedings to trial or hearing, or
(ii) trial or hearing of the proceedings.
(3) An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap:
(a)progress of the proceedings to trial or hearing, or
(b)trial or hearing of the proceedings.
(4) If, in the court’s opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1).
42.5 Indemnity costs …
If the court determines that costs are to be paid on an indemnity basis:
(a)in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:
(i)in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or
(ii) in any other fiduciary capacity, all costs (other than those that have been incurred in breach of the person’s duty in that capacity) are to be allowed, and
(b)in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.
Some of the general principles which apply to the s 98 CPA and part 42 of the UCPR can be summarised as follows:
a)The principle that costs follow the event is intended to be compensatory not punitive: see Telfer (as Executor for the Estate of the Late Telfer) v Telfer (No 2) [2013] NSWSC 823 at [16]; Footes v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52.
b)To displace the prima facie principle that costs follow the event, a party will need to show that something out of the ordinary has occurred to justify a departure from it: see Martin v the State of New South Wales(No 6) [2012] NSWLEC 227 at [7].
c)The phrase “follow the event” does not necessarily refer to the proceedings as a whole and costs can be awarded based on an evaluation of distinct issues in the proceedings: see discussion in Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 (“Bonic v Pacific”) at [8]–[12].
d)The court in its discretion may refuse to make a costs order in favour of a successful party and it may order costs against a successful party where this is appropriate: see discussion of examples in Bonic v Pacific at [14].
The power to make a specified gross sum costs order under s 98(4)(c) of the CPA (the order which the second and third respondents seek in this case), was recently considered by Slattery J in Starr-Diamond v Diamond (No. 4) [2013] NSWSC 811. His Honour stated the applicable legal principles to be as follows at [8]–[12]:
8. … Although the Civil Procedure Act s 98(4)(c) power has been described as particularly suited to complex litigation, the rule is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever the circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119 (von Doussa J).
9. Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp [2002] NSWCA 213 (“Schipp”) at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 (“Hadid”) (Lehane J).
…
11. The court may make such an order “at any time before costs are referred for assessment”. The existing costs order has not been referred for assessment.
12. How does the lump sum assessment take place? The specified gross sum under s 98(4)(c) can be fixed broadly, having regard to all the information available to the court: Schipp at [22] and Hadid at [27]. The approach taken to the estimation of costs must be “logical, fair and reasonable” and the powers should only be exercised when the court considers it can do so “fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available”: Schipp at [22] per Giles JA.

Costs applications in the Family Court following exercise of the accrued jurisdiction

At the hearing of the costs application, counsel for the wife and counsel for the second and third respondents came prepared to deliver oral submissions on the basis that their costs applications would be heard under s 117 of the FLA. Written submissions addressing s 117 of the FLA were filed with the court by both sides prior to the hearing.
At the commencement of the hearing the court took the view that it could not accept that it had jurisdiction under the FLA simply because both parties had consented to it. Counsel on both sides accepted this position, which is uncontroversial. In Finlayson & Finlayson & Gillam (2002) FLC 93-121, where a similar situation arose, the Full Court (Lindenmayer, Finn and Boland JJ) stated as follows at [82]:
82. Notwithstanding the ultimate agreement of the parties as to the existence of a sound jurisdictional basis for the trial Judge’s orders in the proceedings between the husband and the other parties, it was acknowledged by all that jurisdiction cannot be conferred on the Court by consent of the parties, where none is conferred by the law: Ridley v Whipp (1916) 22 CLR 381 at 386. Accordingly, it is necessary for us to satisfy ourselves that such jurisdiction as the parties contend the trial Judge had to determine those proceedings existed, as a matter of law. (emphasis added)
Similarly to the situation described above, it is necessary in these proceedings for the court to satisfy itself that it either does or does not have jurisdiction to hear the costs applications under the FLA.
In an effort to do so, the court has looked to prior decisions of this court where claims heard in the court’s accrued jurisdiction have been followed by costs applications. There appear to be only are a few cases where this situation has arisen – that is, cases in which the court has had to decide whether to hear the costs applications under s 117 of the FLA or under some other costs regime.
In Jones & Anor & Markham [2010] FamCA 1026, Austin J heard an application for costs following substantive property proceedings in which a party (the respondent in the costs proceedings) had unsuccessfully brought a suit in equity against two other parties (the applicants in the costs proceedings) which was heard in the court’s accrued jurisdiction. In declining to hear the costs application under s117 of the FLA, Austin J stated as follows at [15]:
15. It is trite to observe that costs in the Family Court are regulated by the provisions of s117 of the Act. That legislative provision ensures that ordinarily each party bears his or her own costs of the proceedings. However, it must be observed that that rule applies to proceedings under the Act. The proceedings between the applicants and the respondent in respect of the equity suit were not proceedings under the Act.
After noting that the applicants had been wholly successful with respect of the equity suit, Austin J went on to state at [17]:
17. I have regard for the fact that ordinarily costs follow the event in relation to claims brought at common law and in equity. I am satisfied that it is appropriate that the respondent pay the costs of the applicants, at least in respect of the equity suit which he unsuccessfully prosecuted against them.
In Skinner & Alfonso-Skinner (Costs) [2010] FamCA 1108 (“Skinner”), Murphy J considered a costs application following substantive proceedings in which the Court’s accrued equitable jurisdiction had been invoked. The wife, who was successful in the substantive proceedings, submitted that s 117 of the FLA had no application to her costs claim and that “costs should follow the event” (at [2]).
Whilst in Skinner the husband (against whom costs were sought) agreed that s 117 of the FLA did not apply, Murphy J thought it necessary to satisfy himself as to the jurisdictional point. The submissions advanced by the wife were summarised by his Honour, who ultimately agreed with her and declined to hear the costs application under the FLA. The following was said at [14]–[22]:
14. The wife's submission is that the reference to proceedings "under the Act" meant precisely that and, as a result, ought be distinguished from proceedings that are not brought "under the Act" but pursuant to other aspects of the court's jurisdiction.
15. Counsel for the wife submits:
The section does not say, for example, that "each party to proceedings before the court shall bear his or her own costs of the proceedings before the court" nor does s 117 refer to "proceedings relating to this Act".
16. An analogy is drawn by counsel between these proceedings in which the jurisdiction invoked is the court's (accrued) equitable jurisdiction (as found by me) and, s 1337(C) of the Corporations Act 2001 (Cth) which confers jurisdiction on this court with respect to civil matters arising under the Corporations legislation. It is submitted that a matter emanating from that grant of jurisdiction could not be described as "proceedings under this Act" as specified in s 117.
17. Further, whilst, it has been determined that the apparent object of s 117 is to "ensure that spouses are not deterred from bringing or maintaining legitimate applications for fear of incurring an intolerable financial burden if they lose" (Bale-Sutch and Bale-Sutch [2007] FamCA 463 at [13]) "no such policy", it is submitted, "is to be evinced", for example, from the terms of the Corporations Act.
18. So, too, it is submitted that s 100 of the Child Support (Assessment) Act 1989 (Cth) is necessary for the very reason that proceedings under that Act are not "proceedings under this Act" within the terms of s 117.
19. It is submitted that "a proceeding under the Act is a proceeding which claims relief pursuant to a specified provision or provisions of the Act". It is pointed out that s 117 does not use the language of "matter" or "matters arising under the Act" which such language is used in other provisions of the Act (see eg s 31; s 33). That "matter" and "proceedings" are not the same thing (the latter possibly being narrower than the former) was made clear in Re Wakim; ex parte McNally (1999) 198 CLR 511 at 586 and Warby & Warby [2002] FLC 93-091 (at para 79).
20. Thus, it is submitted, where the jurisdiction exercised by the court is accrued equitable jurisdiction (or, indeed, the court's implied jurisdiction — CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391–392), proceedings referenced to that jurisdiction are not proceedings "under the Act".
21. That conclusion is reinforced, it is argued, by the determination of the Full court of this court that the court has no statutory power (ie no power "under the Act") to stay proceedings in favour of a foreign court; rather it has an implied power to do so (see In the Marriage of B [2003] FLC 93-136, para 51–57; EGK v TSL [2006] FLC 93-297, para 83(i) and (ii)).
22. I agree with the submissions just outlined and that the concession by counsel for the husband is properly made. I conclude that the power to award costs in respect of the instant proceedings does not lie pursuant to the Act (and, specifically, s 117). If such a power exists, it needs to be found elsewhere.
After considering where else the power to award costs in the case before him might lie Murphy J concluded that, by virtue of s 79(1) of the Judiciary Act 1903 (Cth), such a power existed and was governed by s 98 of the CPA: Skinner at [25]–[26].
In C Pty Ltd v PGW As Liquidator of S Pty Ltd (in liq) (2011) 256 FLR 361; (2011) FLC 93-485 (“C Pty Ltd v S Pty Ltd”), the Full Court (Strickland, Ainslie-Wallace, Murphy JJ) considered an appeal against orders made by Cohen J subsequent to concluded s 79 proceedings between a husband and wife. In the proceedings at first instance, Rowlands J made an order to wind up a company owned by the husband and wife (S Pty Ltd). Later, the liquidator of S Pty Ltd (the liquidator) filed an application against the husband and wife to recover monies that S Pty Ltd had as guarantor paid to a bank to discharge a loan (the guarantee proceedings).
The husband and wife sought to have the guarantee proceedings transferred to the NSW Supreme Court, claiming that this court lacked jurisdiction to hear the matter. In determining the transfer application, Cohen J held that the guarantee proceedings were related to the winding up of S Pty Ltd and that, therefore, they were a “matrimonial cause” within the meaning of s 4(1)(f) of the FLA. Further, his Honour found that any dispute over the implementation of Rowland J’s orders were part of the whole justiciable controversy of which the family law claim was a part and that the guarantee proceedings thus fell within the court’s accrued jurisdiction. Relevantly, the husband and wife had also sought an order against S Pty Ltd for security for costs, which Cohen J considered pursuant to s 117 of the FLA and ultimately declined to make.
In considering the decisions of Cohen J and, specifically, whether the guarantee proceedings were “a matrimonial cause”, the Full Court said as follows at [73]–[76]:
73. As to the winding up proceedings there is no doubt that the Family Court of Australia has jurisdiction to hear them under the power vested in it under s 1337C of the Corporations Act. However, that does not prevent those proceedings from also being a matrimonial cause relying on paragraph (f). That issue though, and the question of the remoteness of the guarantee proceedings from the s 79 proceedings depends on the meaning of the phrase “in relation to” in paragraph (f).
74. That phrase has received a good deal of attention from the High Court, and two decisions in particular were cited to us by the appellant’s senior counsel, namely Perlman v Perlman (1984) 155 CLR 474 and Kennon v Spry (2008) 238 CLR 366. In the former case, Gibbs CJ said this (at 484-485):
The words “in relation to” import the existence of a connexion or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind… An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings (so that, e.g., an application by a divorced wife for a settlement and transfer of property is a proceeding in relation to the completed proceedings for the divorce) …Proceedings brought to revoke an approval, in the limited circumstances permitted by s. 87(6) of the Act, would be proceedings in relation to the completed proceedings for the approval. However, an application to enforce the maintenance agreement in the present case (i.e., the deed) was not consequential on or incidental to the order approving of the maintenance agreement and it did not vary, reverse or otherwise affect the order giving the approval… Although a grant of approval was a condition of the efficacy of the maintenance agreement, the subject of the present proceedings is not the approval but the agreement. There is a connexion between the present proceedings and the deed, since the present proceedings are brought to enforce the deed; there is none, except of a remote and indirect kind, between the present proceedings and the proceedings brought to obtain the approval. So far as the present proceedings are concerned, the proceedings brought to obtain the approval simply form part of the historical background. The proceedings in the present case are not proceedings in relation to the proceedings for the approval. (authorities and footnotes omitted)
75. In the latter case, Kiefel J said this (at 440):
The expression “in relation to” is of wide and general import and should not be read down in the absence of some compelling reason for doing so. As Toohey and Gummow JJ said in PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service, the words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. Amongst the examples given by their Honours was the consideration given by Gibbs CJ, in Perlman v Perlman, to the meaning of the words “in relation to” in the Family Law Act with reference to two sets of proceedings. His Honour said that they “import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind”. (footnotes omitted)
76. It seems to us that in applying these tests there can be no question that the winding up proceedings are related to the completed s 79 proceedings. Indeed, the winding up order was made in those s 79 proceedings. However, the real issue is as to the guarantee proceedings vis a vis the s 79 proceedings. The questions to be asked are what is the relationship between these two sets of proceedings, is it of the appropriate kind, and are they too remote? Mr Feller says that the examples given by Gibbs CJ in Perlman where the connection is insufficient, apply here. However, we do not agree. In our view the connection is that the guarantee proceedings are a necessary part of the winding up process that ensures that the orders made pursuant to s 79 of the Act are able to be adhered to. They are clearly interrelated in the requisite way. The orders sought are “consequential on or incidental to a decree made in the completed proceedings”. If not carried out correctly, they have the potential to affect the orders made in the s 79 proceedings by diluting the wife’s entitlement pursuant to those orders. That distinguishes this case from the examples given by Gibbs CJ in Perlman in the paragraph quoted above. As such there can also be no question of remoteness.
Notwithstanding the finding that the guarantee proceedings were a matrimonial cause, the Full Court went on to consider whether the guarantee proceedings were within the court’s accrued jurisdiction, as this had been another point of appeal. The Full Court at [89] held that:
89. … It is patently obvious that the winding up proceedings, being a matrimonial cause, and the guarantee proceedings which are brought by the Liquidator in the context of progressing the winding up proceedings, are part of the one “justiciable controversy.
Moving on to Cohen J’s dismissal of the application for security for costs, and the husband and wife’s complaint that it should not have been heard under s 117 of the FLA, the Full Court said as follows at [122]:
122. In any event, we do not consider that his Honour erred in applying s 117 of the Act because, as we have found, his Honour was correct in concluding that the guarantee proceedings are a matrimonial cause. Thus, there were, within jurisdiction, “proceedings” within the meaning of s 117. We also observe that during the hearing before us the senior counsel for the appellants conceded that this would be the case if the proceedings were found to be a matrimonial cause.
It is helpful to note, at this point, that the definition of “matrimonial cause” as referred to in C Pty Ltd v S Pty Ltd plays into s 31 of the FLA which specifies the original jurisdiction of the Family Court of Australia. Given that Murphy J formed part of the majority in C Pty Ltd v S Pty Ltd, his Honour clearly would have to take a different position in relation to that taken by him in Skinner were those facts to be repeated in another case before him.
In Thorpe & Thorpe & Anor [2012] FamCA 719, Benjamin J considered a costs application arising from proceedings which had involved a claim in equity by the applicant (the wife in the substantive property proceedings) against the second respondent (a third party) in respect of land owned by the second respondent.
The wife’s claim in equity was summarily dismissed by Benjamin J and a costs order was made against her, not under the FLA but pursuant to the principles adopted in courts of equity. His Honour said at [13]:
13. In terms of the question of costs, there are a number of aspects which have been raised. Firstly, whether it should be dealt with under s 117 of the Family Law Act, which provides, subject to sub-section 2:-
Each party to proceedings under this Act shall bear his or her own costs.
14. It seems to me that the term under this Act means proceedings between parties. There was no argument that the application by the wife against the second respondent was under the accrued jurisdiction of this Court, so whilst the proceedings, in that regard, are in this Court, they are an accrued jurisdiction of either the Supreme Court or the Federal Court in equity. It seems to me, in those circumstances, that the costs ought to be dealt with in accordance with the normal principles adopted by those courts, that is that costs follow the event.
15. Interestingly, had the application have been made under the third party amendments, then I suspect that s 117 would have applied. The interesting aspect, of course, in relation to costs in this matter would have been the question of the wife’s financial circumstances, which I take, from the material before me, are of a somewhat impecunious nature. However, notwithstanding that, if one takes proceedings in the Federal Court or the equity division claiming an equitable interest in a property and that proceeding is dismissed, it would normally be that the costs would follow the event and I propose to do so in this case and I will direct that the costs will be determined under the Rules in accordance with the scales under the Family Law Act, however, I will certify for senior counsel.
In Bryer & Bryer & Anor [2012] FamCA 884, Ryan J awarded costs to a second respondent (an estate) who had been joined to proceedings between a husband and wife on the application of the wife. The husband and wife ultimately settled the property proceedings before final orders were made, and the estate sought costs.
Even though the estate had sought relief against the husband and wife under the Court’s accrued jurisdiction, and notwithstanding that Ryan J made an order transferring the proceedings constituted by the estate to the NSW Supreme Court, her Honour applied the provisions of s 117 of the FLA to make an order that the costs of the estate be paid by the husband and wife in equal shares. It should be noted that no argument was presented to her honour suggesting that the costs application should have been determined outside the provisions of s 117 of the FLA.
In Gallieni & Gallieni & Ors [2013] FamCA 314 (“Gallieni”), Benjamin J heard two costs applications following the determination of s 79 property proceedings between a husband and wife in which there had been four interveners. The costs applications were brought by the wife and the first and second interveners.
One of the preliminary questions that Benjamin J had to consider in Gallieni was whether the costs application brought by the first and second interveners should be determined pursuant to the original jurisdiction of the Family Court under the Corporations Act 2001 (Cth) (“the CA”) or determined under s 117 of the FLA. On this point, his Honour commented at [40]–[44]:
40. The proceedings between the first and second interveners and the husband and the third and fourth interveners related substantially to issues determined under the Corporations Act. In particular s 1337C of that Act confers on the Family court original jurisdiction with respect to civil matters arising under the Corporations legislation.
41. Harmoniously, s 31(1)(d) of the Family Law Act enables the Family court to exercise original jurisdiction under the Family Law Act or any other Act, and provides:
31 (1)
Jurisdiction is conferred on the Family court with respect to:
…
(d) matters (other than matters referred to in any of the preceding paragraphs) with respect to which proceedings may be instituted in the Family court under this Act or any other Act [emphasis added].
42. To determine the property of the husband and the wife and their alter egos, it was necessary to deal with issues raised by the wife as to the structure and management of the Company. The first and second interveners joined the proceedings and that part of the proceedings was conducted with regard to various aspects of the structure of the Company including the winding up order, the rectification of the share register and the proof of debt injunction. The provisions of the Corporations Act were the primary source of statutory power to make the relevant orders in regard to the Company.
43. Section 1335(2) of the Corporations Act provides:
The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, at its discretion, directs.
44. It was submitted by counsel for the first and second interveners that the Family court has power, by conferral, to make a costs order pursuant to s 1335(2) of the Corporations Act. She went on to submit that the significant difference between the costs determined under the Corporations Act, and those determined under the Family Law Act; is that under s 1335(2) there is no primary position that each party shall bear their own costs.

Given that in the substantive proceedings the claim brought by the first and second interveners was heard under the CA but in the original jurisdiction of the Family Court rather than in the Federal Court, Benjamin J thought it apt to consider the statutory power of the Federal Court to award costs under s 43(1) of the Federal Court of Australia Act 1976 (Cth) (“the FCA”). That provision grants the court or a judge the power to award costs in all proceedings before the court “other than proceedings in respect of which any other Act provides that costs shall not be awarded.”
In finding that the Federal Court’s power to award costs was broader than the Family Court’s, his Honour went on to examine Federal Court cases which had considered the interaction of s 43 of the FCA and s 1335(2) of the CA. While the cases cited focussed on the issue of awarding costs against third parties, the line of authorities show that s 1335(2) of the CA does not fetter the Federal Court’s discretion to award costs against non-parties under s 43 of the FCA. To this end, Benjamin J concluded at [50]:
50. The thrust of the Federal Court approach is in the discussion of their power to make orders against third parties. It is the breadth of the Federal Court legislation that prevents s 1335 of the Corporations Act operating as a bar to restrict that broader application of the costs power.
Drawing his analysis back to the FLA, his Honour continued at [51]:
51. In the context of the Family Law Act and Corporations Act I am satisfied that s 1335(2) should determine the basis to which costs are ordered as between the husband and the first and second interveners, as the primary issue is that under the Corporation Act. If the issues are combined (such as they were in the stay application and in the framework of the wife’s issues with the husband) then s 117 of the Family Law Act should apply.
Notwithstanding the above, Benjamin J ultimately decided to determine the costs application of the first and second interveners under s 117 of the FLA, commenting that the outcome was not likely to differ whichever provisions he applied. His Honour said the following at [52]:
52. … in the circumstances of these proceedings the distinction is not that significant as either way the result is unlikely to be different. Discretion cannot be determined in a vacuum. I will have regard to and apply the various factors set out in s 117(2A) of the Act in identifying matters to consider when exercising that costs discretion.

Jurisdictional issues arising in costs applications in the Federal Court of Australia

It is well established that the Federal Court of Australia, like the Family Court of Australia, has an accrued jurisdiction: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd; United States Surgical Corp v Hospital Products International Pty Ltd (1981) 148 CLR 457 (“Philip Morris”); Fencott v Muller (1983) 152 CLR 570.
In Philip Morris, the following description of accrued jurisdiction was provided in the judgment of Barwick CJ at p.475:
It is settled doctrine in Australia that when a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter. This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has in the first place attracted federal jurisdiction. It extends, in my opinion, to the resolution of the whole matter between the parties. This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution. For this purpose, the court exercising federal jurisdiction may enforce rights which derive from a non-federal source. This exercise of this jurisdiction, which for want of a better term I shall call “accrued” jurisdiction, is discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter.
Subsection 43(1) of the FCA sets out the power of the Federal Court to award costs as follows:
Subject to subsection (1A) and section 570 of the Fair Work Act 2009, the court or a Judge has jurisdiction to award costs in all proceedings before the court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.
It is also relevant to note that, under s 19(1) of the FCA, the Federal Court has such original jurisdiction as is vested in it by laws made by the parliament.
Notwithstanding the existence of the power to award costs under s 43(1), there have been a number of cases which have considered how Acts which confer jurisdiction on the Federal Court by virtue of s 19(1) affect its discretion to award costs under the costs regime set out in the Federal Court Act.
One such line of cases relates to the interplay between s 43(1) of the FCA and s 347(1) of the (superseded) Industrial Relations Act 1988 (Cth) and s 824 of the (superseded) Workplace Relations Act 1996 (Cth) (“the WRA”), the latter of which was expressed in the following terms:
824 Costs only where proceeding instituted vexatiously etc.
(1) A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) must not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.
In Construction Forestry Mining and Energy Union & Anor v Director of the Fair Work Building Industry Inspectorate (No 2) (2013) 296 ALR 443, the Full Court of the Federal Court (North, Logan and Robertson JJ) considered, inter alia, the interaction between s 824 of the WRA and s 43(1) of the FCA in a case where there had been a breach of the Building and Construction Industry Improvement Act 2005 (Cth) (“the BCIIA”).
Given that s 824 of the WRA restricted the making of an order for costs, the court was left with the question of how this provision would operate when the proceedings also involved matters arising under a different act, in this case the BCIIA. The Full Court held as follows at [62] and [64]:
62. In our view consideration should be given to the strong implication to be derived from the BCII Act that in a proceeding in which the court has jurisdiction under that Act, by s 43 of the FCA the court has a statutory discretion to award costs.
…
64. Giving the provisions a harmonious operation, in our view where the matter arises under two Acts of the Parliament, s 824 of the WR Act does not apply to the entirety of the proceeding to limit the power of the court to make a costs order. This does not mean that the court does not have jurisdiction or that its jurisdiction is not federal jurisdiction.
Therefore, put very simply, the restriction on the award of costs contained in s 824 of the WRA did not limit the power of the Federal Court to exercise its power to make a costs order under s 43(1) of the FCA.

Conclusion as to the jurisdictional issue

The decision of the Full Court of the Family Court in C Pty Ltd v S Pty Ltd is binding on trial judges. It also resolves the dilemma which is created by the words “proceedings under this Act” as the words appear in s 117 of the FLA.
Once “a proceeding” is a “matrimonial cause”, as defined by the definition of matrimonial cause in s 4 of the FLA, then s 31 of the FLA is called into play and the proceeding falls within the original jurisdiction of the court.
Consequently, once the court has determined that it is appropriate to exercise its accrued jurisdiction in relation to a proceeding which would otherwise be outside of the court’s statutory jurisdiction, then that proceeding will invariably become a matrimonial cause, as defined by s 4 of the FLA. Thus, s 117 of the FLA becomes available to the court should an application for costs be made relating only to the proceeding which was considered by the court having to accrue jurisdiction to do so.

Determination of the costs applications

As set out above, s 117(1) of the FLA provides that “each party to proceedings under this Act shall bear his or her own costs.”
In this case I am of the opinion that the provisions of that subsection should be adhered to. It is my determination that neither the wife nor the second and third respondents have established a case for exercise of discretion in their favour through the making of a costs order. The matters which principally inform that determination are as follows:
a)The second respondent was not wholly successful in the action brought against the husband. The declarations sought by the second respondent were substantially different to those ultimately made by the trial judge.
b)There is a significant disparity in the financial circumstances of the second respondent and the wife, even considering the implementation of the property order made by the trial judge. The wife will be left with very little capital and no income earning capacity of note in the future. That is not the case with the second respondent. Although this consideration may be peculiar to s 117 of the FLA, had it not been available to determine the costs applications I would still have been moved to make no order for costs after considering all of the other matters referred to herein.
c)The second respondent amended his claim against the husband between the hearing dates which concluded in B Town and the recommencement of the hearing in Sydney to include a quantum merit claim. That was unsuccessful and, as it transpired unnecessary.
d)The offer of settlement made by the second respondent and the husband to the wife as outlined in these reasons was $100,000 short of the award she ultimately achieved.
e)The wife’s offer of settlement was significantly higher than that ultimately achieved by her.
f)Although it was argued, in relation to each of the above set out offers of settlement, that the amount of legal fees incurred by the parties to achieve the ultimate outcome were more than the increase or decrease in the figure required to be paid to the wife under the order of the court, I do not, in this case, consider that to be a complete answer to the proposition that each should have resolved the case on the offers made to them. In any event I do not see one parties’ argument to be more persuasive than the others on this factor.
g)The wife’s legal representative should have sought permission to speak with her about resolving the litigation between the hearing in B Town and the continued hearing in Sydney. It was quite ridiculous in the circumstances of this case to not have any discussion with her about concluding the case through settlement.
Given that the nature of the proceedings between the second respondent, the third respondent and the husband involved the determination of an action which was outside the statutorily defined jurisdiction of the court (until it was determined to invoke the accrued jurisdiction), I take into account that under the UCPR the second respondent would have had the question of costs determined on the “costs follow the event” principle, subject to the allowable discretions.
I take into account that, in the absence of the proceedings in this Court, the second respondent would have been required at some future time to regularise the arrangement which the trial judge found to exist. That may not have been entirely straightforward in the circumstance of an intact relationship between the husband and the wife. Thus, the second respondent would probably have been required to expend money on legal costs (which could have been quite substantial) at some time in the future to have his interests legally recognised.
In relation to the claims by the second respondent that an order should be made against the wife for the costs thrown away by the time Mr N took up in the proceeding and for the time lost in the finality of the trial through the granting of an adjournment to the wife to prepare submissions, I say as follows. If such matters did warrant a costs order then so would the failure of the second respondent to have filed his proceeding by 30 June 2012 as ordered. The wife complained, in my view justifiably, that notice of the claim ultimately made was give very close to the commencement date of the hearing in B Town.
In relation to the costs incurred by having Ms T Farley travel to Sydney for cross-examination on her affidavit and then have the wife advise that she was no longer required, I do consider that such costs should be paid. No explanation has been provided by the wife to explain why she changed her mind about cross-examining Ms Farley. I consider her reasonable expenses should be paid.
Nothing arising from the assessment of the wife as a witness by the trial judge would warrant a cost order being made against her.
For all the above reasons, I make the orders set out at the commencement of these reasons.

I certify that the preceding one hundred and seventy-four (174) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 12 September 2013.

Associate:

Date: 13 September 2013