Harford & Spalding (No 2)
[2023] FedCFamC1F 583
•18 July 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Harford & Spalding (No 2) [2023] FedCFamC1F 583
File number(s): SYC 3026 of 2020 Judgment of: ALTOBELLI J Date of judgment: 18 July 2023 Catchwords: FAMILY LAW – COSTS – Where the husband was wholly unsuccessful – Where the Court found the husband’s Notice to Produce to be an abuse of process – The proceedings were not sufficiently complex to warrant both junior and senior counsel to appear for the wife – Indemnity costs ordered. Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia Rules 2021 (Cth) r 12.17(1)
Cases cited: Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Cross & Beaumont (2008) 39 Fam LR 389; [2008] FamCAFC 68
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123; [2005] FamCA 158
Harford & Spalding [2023] FedCFamC1F 5
In the Marriage of I & I (No. 2) (1995) FLC 92-625; [1995] FamCA 80
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664; [2015] FamCAFC 157
Munday v Bowman (1997) FLC 92-784
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Phillips & Hansford (2020) FLC 93-941; [2020] FamCAFC 28
Rankin & Rankin (No. 3) [2019] FamCAFC 133
Division: Division 1 First Instance Number of paragraphs: 48 Date of last submission/s: 24 March 2023 Date of hearing: In Chambers Place: Sydney Counsel for the Applicant: Ms Louise Carter Solicitor for the Applicant: Newnhams Solicitors Counsel for the Respondent: Ms Rachel Dart Solicitor for the Respondent: Meredith Lawyers ORDERS
SYC 3026 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HARFORD
Applicant
AND: MR SPALDING
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
18 JULY 2023
Amended pursuant to r 10.13(h) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 on 21 September 2023
THE COURT ORDERS THAT:
1.Within 28 days of the date of this order,
Tthe Respondent husband is to pay the costs of the Applicant wife fixed in the sum of $35,000.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Harford & Spalding has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
The applicant wife (“the wife”) seeks an order for costs following the finalisation of the substantive proceedings in relation to the respondent husband’s (“the husband”) application to set aside consent orders. The precise orders sought are as follows:
1. Pursuant to Rule 12.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 the Respondent Husband pays the costs of the Applicant Wife in relation to the proceedings concluded by Order of the Court on 17 January 2023:
a. On an indemnity basis, fixed in the sum of $121,145.
b. In the alternative, on an indemnity basis as agreed or failing agreement, as assessed.
c. In the alternative, on a party/party basis fixed in the amount of $93,944.
d. In the alternative, on a party/party basis as agreed and failing agreement, as assessed.
2. The Respondent Husband pay the Applicant Wife's costs of and incidental to this Application:
a. On an indemnity basis, fixed in the amount of $6,380.
b. In the alternative, on an indemnity basis as agreed or failing agreement, as assessed.
c. In the alternative, on a party-party basis fixed in the amount of $4,662.
d. In the alternative, on a party-party basis as agreed or failing agreement, as assessed.
3. The Court certifies, pursuant to r 12 .28 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, that it was reasonable in the circumstances of the case to engage Senior and Junior Counsel.
(As per the original)
The husband opposes the application and seeks that no order for costs be made in relation to these proceedings. However, if such order were to be made, the husband contends it should be confined to the costs of the hearing before me on the basis that the costs are assessed or agreed pursuant to Schedule 3 of the Federal Circuit and Family Court of Australia Rules 2021 (Cth) (“the Rules”) (r 12.17(1)(d)).
BACKGROUND
On 21 September 2022, the Court heard the wife’s Application in a Case filed on 21 January 2021 seeking summary dismissal of the husband’s Amended Initiating Application filed on 11 March 2021 to set aside consent orders. On 17 January 2023, the Court dismissed the husband’s application and reasons for judgment were provided: Harford & Spalding [2023] FedCFamC1F 5 (“my reasons for judgment”). Where it is relevant, various passages from my reasons for judgment will be referred to or reproduced.
PRESENT APPLICATION
In support of her case, the wife relied on the following material:
(a)Affidavit of the wife’s solicitor, Marcia Simeone, filed 17 February 2023;
(b)Written submissions filed 17 February 2023; and
(c)Written submissions in reply filed 24 March 2023.
In support of his case, the husband relied on the following material:
(a)His affidavit filed 3 March 2023; and
(b)Written submissions in reply filed 3 March 2023.
LEGAL PRINCIPLES
The law relating to costs in family law proceedings is well settled and is set out in detail in the Full Court decision of Parke & The Estate of the Late A Parke (2016) FLC 93-748 (“Parke”).
An application for costs is governed by s 117 of the Family Law Act 1975 (Cth) (“the Act”). Section 117(1) of the Act sets out the general presumption that each party to the proceedings shall bear their own costs. This is subject to s 117(2), which provides that:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as the court may make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) sets out the matters that the Court is to have regard to:
(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.
Although the Court is required to consider each of the abovementioned factors, it is plain that their relevance to a particular matter will depend upon the circumstances of that case and they should be considered in that light. That is, no one factor prevails over another and it is a question of the weight that is to be afforded to each of the relevant factors depending on the circumstances of the matter (Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24]). There is also “nothing to prevent any factor being the sole foundation for an order for costs” (Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123 at [41]).
Whilst the applicant in a costs application must establish the circumstances justifying the making of a costs order, the Court is not limited to making such an order only in what has been described as a “clear case” (Penfold v Penfold (1980) 144 CLR 311).
It is well settled that when costs are ordered by this Court, such costs are payable on a party‑party basis. It has been held that the Court should not lightly depart from the ordinary rule (Kohan and Kohan (1993) FLC 92-340).
The provision relating to the calculation of costs is governed by r 12.17(1) of the Rules which is as follows:
12.17 Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c) to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
The rule further provides that:
(3) In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable cases;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures; and
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
In relation to an award of indemnity costs, the Full Court decision of Phillips & Hansford (2020) FLC 93-941, helpfully summarises the position as follows:
35.Indemnity cost orders are made only in exceptional cases (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
36.Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
37.In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).
DISCUSSION
Section 117(2A)(a): Financial circumstances of the parties
There is no evidence before the Court that enables me to accurately determine the current respective financial positions of the parties. I accept, however, that the husband received a cash payment of $700,000 from the wife when the parties resolved their property proceedings on 29 May 2020.
The wife contends the husband received approximately 46 per cent of the overall asset pool (paragraph 22 of her written submissions in reply filed 24 March 2023) and therefore cannot deny her costs on the basis of his financial circumstances. The husband alleges, and the Court accepts, the wife’s financial position is superior to that of his (paragraph 22 of his written submissions filed 3 March 2023) by way of her employment.
In any event, a party’s inability to pay costs is not a bar to a costs order being made if that party’s conduct is found to warrant such an order (Cross & Beaumont (2008) 39 Fam LR 389).
In this matter, I am satisfied that there are other conditions set out in s 117(2A) of the Act which justify an order for costs being made in favour of the wife, and that there is no evidence before me to indicate that a costs order should not be made against the husband due to his financial circumstances.
Section 117(2A)(b): Whether the parties are in receipt of legal aid
Neither party is in receipt of legal aid.
Section 117(2A)(c): The conduct of the parties
At paragraph 11 of the wife’s written submissions filed 17 February 2023, she provides four different examples of the husband’s conduct that she alleges caused her substantial and unnecessary costs such that it warrants an order for indemnity costs being made in her favour. This is reproduced below:
a.The husband’s contention in relation to the value of various designer items was entirely contrary to the position the husband adopted in relation to the same issue earlier in the proceedings;
b. The Notice to Produce issued to the wife one week out from the hearing was considered by Altobelli J to be an abuse of process;
c. The husband filed “voluminous material” in the proceedings however failed to address how there could be a miscarriage of justice in the circumstances; and
d. The husband raised contentions, including a claim that the wife failed to disclose overseas bank accounts, which had been run before and had been found to have no merit (a finding which was not the subject of any challenge at the appeal hearing). Nevertheless, the husband ran the same argument with no further evidence before Altobelli J. Justice Altobelli agreed with the wife that such action was an abuse of process and concluded that it was “[an abuse of process] in the sense discussed by Brennan J in Williams v Spautz”.
Further, the wife relies on correspondence between the parties’ solicitors contained in paragraphs 7–8 of the wife’s solicitor’s affidavit filed 17 February 2023. This is reproduced below.
7.Prior to the re-hearing, attempts were made to ascertain the nature of the Husband's Section 79A claim against the Wife to see if the parties could narrow the issues in dispute. On 26 August 2022 I wrote to the Husband's solicitor on behalf of the Wife seeking clarity from the Husband's solicitor about the Husband's case by 31 August 2022 and putting the Husband on notice of a costs application if he did not respond and the matter was required to be re-listed.
8. On 5 September 2022, I received a response from the Husband's solicitor to the effect that the Husband's case was not limited to those matters contained in my letter. On 14 September 2022 I wrote again to the Husband's solicitor asking him to particularise the basis (other than the value of designer [items]) for the Husband's claim. A response was received on Sunday, 18 September 2022 which did not assist matters. Annexed hereto and marked with the letter "A" are true copies of the abovementioned correspondence between myself and the Husband's solicitors.
(As per the original)
The husband addresses his conduct in the hearings before Henderson J, the Full Court, and myself separately, as whilst his primary position is that no order be made as to costs, he seeks that if an order for costs were to be made, it should only be confined to the hearing before myself.
In relation to the wife’s costs of the hearing before Henderson J, the husband contends the application was made by the wife and successfully resisted by the husband, although it was set aside on appeal. The husband further alleges that no complaint has been made about the husband or his conduct in the hearing before Henderson J referable to matters in s 117(2A)(c) or (e) of the Act. The Court accepts this. No costs will be awarded for the hearing before Henderson J in favour of the wife.
In relation to the appeal, the husband contends that the wife succeeded on the basis of a mistake of a material fact and adequacy of reasons, which are matters wholly unrelated to the husband or the manner in which the proceedings were conducted on his behalf before Henderson J. The Court accepts that the husband was ultimately unsuccessful in resisting the appeal and has already met the costs ordered against him. The husband refers to the wife’s submissions referencing her costs incurred over protracted proceedings taking two years and he submits that he bears no particular responsibility regarding the length of time and has merely diligently prosecuted his s 79A claim. In circumstances where the husband has already met the costs of the appeal, the Court accepts that it would be unjust to place blame on the husband for the length of the protracted proceedings that resulted from the unfortunate, but often unavoidable, delays of the Court system.
In relation to the hearing before myself, the husband concedes the Court found his Notice to Produce an abuse of process but he argues this is distinguishable from the proceedings itself which was not found to be an abuse of process. The husband denies that these issues prolonged the proceedings as the wife’s evidence was that she had no intention of providing material in answer to the Notice to Produce and did not do so.
In relation to the correspondence between the solicitors, the husband concedes there could have been a more fulsome engagement with the request for clarity but alleges that because the request occurred in such close proximity to the rehearing, it was not relevant to the Court’s exercise of discretion. The husband further points out that the wife neither sought a direction for the filing of Points of Claim, nor relisted the matter on this issue (paragraph 13 of the husband’s written submissions filed 3 March 2023).
This Court has traversed the conduct of the husband in relation to his Notice to Produce at [14] and the voluminous material filed in support of his case at [37]–[40] of my reasons for judgment. I specifically refer to [37]:
…It was incumbent on his counsel to elucidate his claim by reference to the husband’s evidence and not to engage in unhelpful and superficial generalities in the expectation that the Court would trawl through the husband’s material and discover a hitherto hidden gem that would prove the husband’s case.
I accept that the wife incurred unnecessary costs in the proceedings before myself. The Court finds that whether or not the wife intended to provide material in answer to the Notice to Produce or whether she intended to relist the matter is not relevant to costs being awarded in her favour. The wife incurred costs by way of her legal representatives having to read and consider the material and issues unnecessarily put forward by the husband. An order for costs is warranted by virtue of the conduct of the husband.
Section 117(2A)(d): Failure to comply with orders of the Court
Neither party contended this was a relevant consideration in determining whether a costs order should be made.
Section 117(2A)(e): Whether a party has been wholly unsuccessful in the proceedings
It is uncontroversial that the husband has been wholly unsuccessful in these proceedings as his s 79A claim was summarily dismissed. However, the Court notes the husband only concedes to being wholly unsuccessful in the proceedings before myself and hence any costs order made should be limited to that hearing rather than the totality of proceedings.
It is clear that the husband was wholly unsuccessful in these proceedings. Any costs order will be limited to that.
Section 117(2A)(f): Offers of settlement
The wife relies on an offer to settle the costs dispute made by her on 27 January 2023 for a fixed sum payable to her of $90,000.
In relation to this offer, the husband alleges the offer only remained open for three business days and submits that the terms of the offer and the timeframe in which it was open did not amount to a genuine and commercial offer to settle the proceedings to warrant the costs of the cost application being visited upon the husband.
The Court does not need to consider this as the offer of settlement is based on the whole of the two year period that these proceedings have been ongoing and a costs order will only be made specific to the proceedings before myself.
Section 117(2A)(g): Any other relevant matters
The wife seeks that indemnity costs be fixed pursuant to r 12.17(1)(a) of the Rules.
The wife also seeks that the Court find it was appropriate for senior and junior counsel to be retained in light of the issues and volume of material relied upon by the husband. The husband contends he was represented by junior counsel in both the hearing before Henderson J and myself whilst the wife was represented by senior and junior counsel at the rehearing. The husband alleges it would be unjust to visit those costs upon the husband as there was no particular complexity associated with the wife’s application or the evidence. The Court agrees with the husband that this matter was not sufficiently complex to warrant both senior and junior counsel and it would be unjust to burden these costs on the husband.
CONCLUSION
For these reasons, I am satisfied that it is in the interests of justice for an order for costs to be made in favour of the wife, confined to the proceedings before myself, and be limited to junior counsel only.
SHOULD COSTS BE ORDERED ON AN INDEMNITY BASIS?
The wife seeks indemnity costs in the sum of $121,145 for the proceedings concluded by the Court on 17 January 2023 and $6,380 for this costs application, and in the alternative, on an indemnity basis as agreed or as assessed, or on a party/party basis fixed in the amount of $93,944 and $4,662 or on a party/party basis as agreed or as assessed.
The wife relies on the Full Court in Rankin & Rankin (No. 3) [2019] FamCAFC 133 where the Court stated that the purpose of r 12.17(1)(a) of the Rules is “practical and aimed at avoiding the expense, delay and aggravation involved in protracted litigation arising out of taxation”.
A costs order is compensatory in nature, not punitive. The Court accepts that there is a significant chasm between costs that are payable pursuant to Court approved schedules of fees, and the professional fees actually charged.
In Munday v Bowman (1997) FLC 92-784 at 84,660, CJ Holden summarised the High Court of Australia’s consideration as to when circumstances justify an order of costs on an indemnity basis per Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 as follows:
(a)Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts (see Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. [1988] FCA 202; [1988] 81 ALR 397.)
(b)Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud (see Fountain Selected Meats (Sales) Pty. Ltd. (supra).
(c)Evidence of particular misconduct causing loss of time to the court and to other parties (see Tetijo Holdings Pty. Ltd. v Keeprite Australia Pty. Ltd (unreported, Federal Court, 3 May 1991)).
(d)The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (see Ragatta Developments Pty. Ltd. v Westpac Banking Corporation (unreported Federal Court, 5 March 1993)).
(e) An imprudent refusal of an offer to compromise [Medlon No. 6 (supra)].
The conduct of the husband falls within the parameters described by the High Court and the findings made in my reasons for judgment support this conclusion. The findings made in relation to the husband’s conduct in these proceedings, such conduct being found an abuse of process and his application being wholly unsuccessful, make an indemnity costs order appropriate.
The wife is entitled to indemnity costs, however, it should be limited to the costs incurred for the hearing before myself. The wife’s counsel fees are marked as annexure C to her affidavit. For the purposes of the hearing before myself, the fees for her senior counsel were $44,134 and her junior counsel were $7,333.34. As previously determined, the Court will not burden the husband with the costs of both senior and junior counsel. As for the wife’s solicitor fees, the costs rendered by her firm were marked as annexure D to her affidavit. It is difficult to discern which fees are solely attributable to the proceedings before myself.
Each party should pay their own costs arising out of the costs application. There are no indicia warranting a departure from the general rule in this regard.
QUANTIFICATION OF COSTS
Rule 12.17 of the Rules sets out the methods of calculating costs. These include the Court fixing a specific amount for costs (r 12.17(1)(a)) or an order for the costs to be assessed on a particular basis (r 12.17(1)(b)).
The Full Court decision in Parke stated at [130]:
If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court”…The process does not “by its very nature…envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”
Consistent with those principles, it has been determined that where a Court orders a party to pay costs, it may be appropriate for the Court to fix a lump sum. By doing so, the Court can avoid further delay and inconvenience being occasioned by the requirement to tax a bill: Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51].
CONCLUSION
Doing the best the Court can on the limited evidence, the husband is ordered to pay the costs of the wife fixed in the sum of $35,000.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 18 July 2023
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