Hartnett & Sampson (Costs)
[2007] FamCA 1456
•14 December 2007
FAMILY COURT OF AUSTRALIA
| HARTNETT & SAMPSON (COSTS) | [2007] FamCA 1456 |
| FAMILY LAW – COSTS – Costs orders in relation to non-parties – Consideration of s 117(2A) matters – Indemnity or party/party costs |
| Family Law Act 1975 (Cth) |
| Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 Re JTT; Ex parte Victoria Legal Aid (1998) FLC 92-812 S v S; The Child Representative; Victoria Legal Aid; The Chief Commissioner of Victoria Police (1997) FLC 92-762 Yunghanns v Yunghams (2000) FLC 93-029 |
| APPLICANT: | Mr Hartnett |
| RESPONDENT: | Ms Sampson |
| INDEPENDENT CHILDREN’S LAWYER: |
| FILE NUMBER: | SYF | 3827 | of | 2004 |
| DATE DELIVERED: | 14 December 2007 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 12 October 2007 and 25 October 2007 by written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | In person |
| SOLICITOR FOR THE APPLICANT: | In person |
| COUNSEL FOR THE RESPONDENT: | Mr Livingston |
| SOLICITOR FOR THE RESPONDENT: | Mr Paul |
| COUNSEL FOR NON-PARTIES GAYLE MEREDITH, MICHAEL TAUSSIG AND DEBRA CHERRIE: | Ms Meredith (solicitor) |
| COUNSEL FOR NON-PARTY IMPACT CAPITAL LTD: | Mr Wahhab (solicitor) |
ORDERS
The costs of Gayle Meredith, Michael Taussig and Debra Cherrie and Impact Capital Limited in respect of an application in a case heard the 12 October 2007 be paid by the applicant Mr Hartnett. Such costs and disbursements to be on a party/party basis as agreed between the parties or if not agreed determined under the Rules of Court.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment under the pseudonym Hartnett & Sampson (Costs) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3827 of 2007
| MR HARTNETT |
Applicant
And
| MS SAMPSON |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
These reasons concern an application for costs made orally on the 12 October 2007 by several third parties against Mr Hartnett (“the husband”). These third parties are not parties to the proceedings, having never been joined and were not sought to be joined by the husband. The third parties (or non-parties) were given leave to appear on the basis that their interests could be affected by the determination of the husband’s application for orders to be made that day.
The matters insofar as they related to these non-parties were ultimately determined so that their interests were not adversely impacted. Had the non-parties been joined as parties to the proceedings, I indicated that I would have then considered whether in the circumstances I should make an order for costs. However, I expressed uncertainty as to the power to make a costs order involving a non-party and reserved my decision on that basis.
BACKGROUND
On 12 October 2007, I heard an interim matter in proceedings between the husband and Ms Sampson (“the wife”). One of the applications was that of the husband’s for orders which would have had a significant impact on some third parties, these third parties being Gayle Meredith of Gayle Meredith & Associates (“Meredith”), Michael Taussig and Debra Cherrie of Taussig Cherrie & Associates (“Taussig and Cherrie”) and Impact Capital Ltd (“Impact Capital”). Hereafter, I will collectively refer to these people and entity as “the non-parties”.
In the husband’s response to an application in a case filed on 14 September 2007, he sought orders pursuant to ss 106B and 90AF(2) of the Family Law Act 1975 (Cth) (“the Act”). A consequence of the orders sought by the husband would have been that he receive priority in relation to liabilities of the wife. He later amended this response to an application in a case by filing in Court short minute of orders sought (numbered 1-19) (“the husbands relevant application”).
The wife has outstanding liabilities to all of the non-parties, being legal fees independently and unilaterally incurred by the wife after separation. Meredith and Taussig and Cherrie are law firms which have previously acted for the wife. Impact Capital is a litigation funding firm which advanced finance to the wife during the course of the substantive property proceedings between the husband and the wife.
At the commencement of the interim hearing I asked the husband, who appeared in person, whether he sought to join the non-parties to the proceedings. The husband stated that he did not. I indicated that this could cause some practical problems, however the husband pursued his application. Further, Meredith, Taussig and Cherrie and Impact Capital themselves declined to be joined as parties
Notwithstanding that none of the non-parties were joined to the proceedings, they all sought and were granted leave (unopposed by the husband) to appear and make submissions on the basis that their interests may be affected by the determination of the husband’s application.
At the conclusion of the hearing I determined that, insofar as it related to the orders sought against the non-parties, the husband’s application must be dismissed. I said:
23.[The husband seeks orders] in circumstances where … [the non-parties] have not been joined to these proceedings, and as I said, in circumstances where the amount and the liability has yet to be determined. It seems to me that just on the form of the application, it ought to be dismissed, but I make it clear that the substance of any such application has not been determined.
The non-parties then made submissions seeking costs against the husband in relation to his failed application. As I remained uncertain about the power under which I could order as such, I directed that the non-parties and the husband file written submissions on the question of whether the court is empowered to make a costs order against or in favour of non-parties.
THE APPLICATIONS FOR COSTS
Ms Gayle Meredith, a solicitor of Gayle Meredith & Associates, represents herself and Michael Taussig and Debra Cherrie of Taussig and Cherie & Associates in these proceedings. Ms Meredith made oral and written submissions in relation to these parties’ interests. She seeks a costs order against the husband in the sum of $3,006.58 in relation to her costs, and $2,234.98 in relation to the costs of Michael Taussig and Debra Cherrie. An itemised schedule of costs calculated at scale is submitted for each set of costs claimed.
Impact Capital seeks an order for costs against the husband on a party-party basis, fixed in the sum of $5,024.57 as itemised.
These costs are calculated on a practitioner client basis, and I had indicated that if I made a costs order it would be on a party/party basis.
The Power to make a costs Order In Relation to A Non-Party
Submissions
With regard to the issue of whether the court has the power to award costs against non-parties, Meredith and Taussig and Cherrie identify three possible jurisdictional bases, being:
(a)on a natural reading of s 117(2) of the Act, the Family Court’s jurisdiction to order costs is unlimited (see McAlpin and McAlpin (1993) FLC 92-411; Penfold v Penfold (1980) FLC 90-800);
(b)the cross-vested jurisdiction of the State and Territory Supreme Courts (see McAlpin (above)); and
(c)the Family Court’s inherent jurisdiction (see Knight v FP Special Assets Ltd (1992) 174 CLR 178; Molier and Van Wyk (1980) FLC 90-911).
Impact Capital submits that the court has the power to make an order for costs for and against a non-party pursuant to s 117(2) of the Act (see McAlpin and McAlpin (above)) and further in line with its inherent jurisdiction (see Knight v FP Special Assets Ltd (above)), adopting Meredith and Taussig and Cherrie’s submissions on the latter point. Impact Capital also refers to the decision of Yunghanns v Yunghams (2000) FLC 93-029 which while containing similar facts, represents authority in relation to the award of indemnity costs rather than the power to award costs to a non-party.
The husband submits in response to the non-parties’ written submissions that the court does not have the power to make the costs orders sought by the non-parties. The husband submits that there is no precedent which supports an order for costs in favour of the non-parties. He further submits that:
Given that [the non-parties specifically declined to be joined], it must be considered by the Court that Meredith, Taussig and Impact would have known, as specialist Family Law practitioners, that being non-parties meant that no orders could or would be made against them or against their interests in any event. However, having isolated themselves from any consequences by not being joined as parties to the matter, they now ask the Court to consider making a costs order in their favour on a party/party basis.
The law in relation to costs orders against non-parties
The power to make a costs order for and against a non-party stems from s 117(2) of the Act which provides:
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) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
That s 117(2) does not contain a reference to “parties” has been put forward as an indication that it is applicable to non-parties. The Full Court (per Nicholson CJ and Maxwell J) held as such in McAlpin and McAplin (above) at 80,215, saying:
In our view, on a natural reading of s 117(2) of the Family Law Act, this Court’s jurisdiction to order costs is … unlimited. It is true that s 117(1) and (2A) refer to “parties” but s 117(2) is not so limited and is expressed in the widest possible terms. We therefore see no reason to confine the jurisdiction of this Court in this area.
In the High Court matter of Re JTT; Ex parte Victoria Legal Aid (1998) FLC 92-812 Kirby J expressed similar sentiments, setting out the following:
64.… First, the language of s 117(2) is so broad that the suggested construction [that it does not apply to non-parties] would involve an impermissible narrowing of its operation. Especially as it is intended to apply to an Act which expressly contemplates participation in litigation of non-parties, there are good reasons of principle, arising for the efficient operation of the Act, to avoid such a narrow construction. Some significance must attach to the fact that sub-ss (1) and (2A) refer to “parties” but sub-s (2) contains no such limiting reference … If the Parliament had intended to confine the power “as to costs” to the making of orders against a party, it would have said so. In the context of this Act, it is unsurprising that it did not.
Section 117(2) itself notes that a costs order may be made if there are “circumstances that justify [the court] in doing so”. In relation to a costs order against a non-party, such circumstances have been discussed by the High Court in Knight v FP Special Assets Ltd (above). The relevant passage (per Mason CJ and Deane J, and agreed to by Gaudron J) at page 192 – 193 reads as follows (citations omitted and emphasis added):
Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party …
For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the non-party has played an active part in the conduct of the litigation and where the non-party … has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
The Full Court (per Nicholson CJ and Maxwell J) in McAlpin and McAlpin (above) referred approvingly to the above conclusions in Knight v FP Special Assets Ltd (above) and said at 80,215:
… where cases fall into the category identified by their Honours, they appear to consider that the Court should make such an order.
The power pursuant to s 117(2) to make a costs order against a non-party (and thus basically “for” a non-party) in certain circumstances as per Knight v FP Special Assets Ltd (above) was confirmed by the Full Court in Re Z (No. 4) (Costs of the case stated) (Unreported, Full Court of the Family Court of Australia, Nicholson CJ, Fogarty and Frederico JJ, 6 March 1997) and later by the High Court in Re JTT; Ex parte Victoria Legal Aid (above). Fogarty J in Re Z (No. 4) (above) made the following comments regarding the settled state of the law:
The power of this Court to make an order against a non-party in appropriate circumstances can no longer be in doubt: see, for example, Knight v F P Special Assets Ltd (1992) 174 CLR 179 and a number of well known cases in this Court and elsewhere. The circumstance that such orders should only be made in unusual or special circumstances is well recognised. However, that is quite different from any challenge to the power to do so.
Kirby J made similar comments in Re JTT; Ex parte Victoria Legal Aid (above) at 85,188 (citations omitted and with original emphasis):
... for a long time and in many different circumstances courts have exercised their jurisdiction to order costs against non-parties. The issue presented in challenges to such orders is normally now addressed not to the power to make them but to whether proper procedures have been followed and whether the discretion has been exercised in a lawful manner, “judicially and in accordance with general legal principles pertaining to the law of costs”.
In the first instance judgment of Hannon J in Pagliarella and Pagliarella (No. 3) (1994) FLC 92-460 his Honour stated his belief that the category of cases which are appropriate for a costs order against a non-party is not closed. His Honour said at 80,756:
Although Mason CJ and Deane J [in Knight v FP Special Assets Ltd] referred to the recognition of a general category of case, it seems to me that they were not stating that category as being exhaustive so as to exclude other cases where specific circumstances may justify an order for costs being made against a non-party in the interests of justice. This was adverted to by Nicholson CJ and Maxwell J in McAplin and McAplin … and by Gobbo J in Bischof & Anor v Adams & Ors [1992] 2 VR 198 at page 204 when he said that a relevant consideration was whether there was a causal connection between the non-party and the incurring of the costs, that being a matter that bears directly on the justice of whether he should pay costs that he has caused to be incurred. (See also the comments of Nicholson CJ and Fogarty J in Re P (a child); Separate Representative (1993) FLC 92-376.) It can now be taken as clear law that this Court has jurisdiction to make an order for costs against a non-party at least if that person plays an active part in the litigation and has an interest in the subject of the litigation.
However, Dawson J’s comments Knight v FP Special Assets Ltd (above) should be remembered. His Honour said at page 203:
The circumstances in which it would be appropriate to award costs to a non-party would necessarily be confined, but that is a question of discretion, not jurisdiction.
Nicholson CJ and Maxwell J in McAlpin and McAlpin (above) also noted at 80,215 that the discretion to order costs against a non-party should be exercised sparingly.
An important procedural issue perhaps alluded to above by Kirby J in Re JTT; Ex parte Victoria Legal Aid (above), and noted by Dawson J in Knight v FP Special Assets Ltd (above) at page 203 and Nicholson CJ and Maxwell J in their joint judgment and Baker J in his separate judgment in McAlpin and McAlpin (above), is the opportunity for the non-party to be heard on any costs order to be made against them. In McAlpin and McAlpin (above) Baker J said at 80,208 (citations omitted):
It would seem inconceivable that a court would make an order for costs against a third party (that party not being a party to proceedings) unless that party had been given an opportunity to be heard. To do otherwise would represent a denial of natural justice.
Nicholson CJ and Maxwell J said at 80,213:
… in the normal course, such a third party would be given an opportunity to be heard if it was proposed to make such an order. The requirement to be heard might not always be mandatory however, particularly if the circumstances were such that the trial judge could conclude that the position of the third party was effectively being put through one of the actual parties.
Finally, relevant to this current application before me, it seems that the broad power and discretion to order costs against a non-party operates equally in interim or interlocutory proceedings as it does in final or substantive proceedings. Hannon J in Pagliarella and Pagliarella (No. 3) (above) said at 80,756:
It seems to me … that the principle [that the court has jurisdiction to make an order for costs against a non-party] should not be limited to substantive proceedings but is also applicable to interlocutory proceedings and other applications, such as an application for costs, which arise out of or are related to the substantive proceedings.
In the later first instance judgment of S v S; The Child Representative; Victoria Legal Aid; The Chief Commissioner of Victoria Police (1997) FLC 92-762 Nicholson CJ said at 84,384:
I … proceed upon the basis that the Court does have power, in a general sense, to make cost orders against non-parties including interlocutory orders for costs in appropriate circumstances and that s 117(2) should be so construed.
The law in relation to costs orders in favour non-parties
In Yunghanns (supra) the Full Court made a costs order, on an indemnity basis, in favour of several legal practitioners who were not parties to the proceedings.
In Yunghanns, the husband and various companies under his control appealed against orders made by Dessau J. The appellants sought costs against the wife, the wife’s solicitors, the wife’s senior and junior counsel, the son, the son’s solicitors and the daughter. The appellants subsequently withdrew their application for costs against the non-parties, being the various legal practitioners, who, in turn, sought costs against the appellants on an indemnity basis.
The majority of the Full Court (Lindenmayer and Holden JJ) found that the appellants “extraordinary conduct” of bringing then withdrawing an application for costs against the non-parties justified awarding costs in favour of the non-parties, on an indemnity basis.
The Full Court (including Mullane J who dissented on the majority’s finding that indemnity costs were appropriate, holding rather that costs be ordered on a party-party basis) expressed no doubt whatsoever that the Court had power to grant costs orders in favour of non-parties. The Full Court noted however, that the making of such an order is “a very great departure from the normal standard”.
In other instances the Court has favourably referred in obiter to a power of the Court to order costs in favour of a non-party (see Karras & Shubert (2003))
I can see no valid rationale for presuming that the approach taken to ordering costs in respect of a non-party should not be extended to ordering costs in favour of a third party. In the present case, the non-parties, whilst not formally joined, have participated as if they were a party: the non-parties have made oral and written submissions and have been legally represented and present throughout the entirety of the relevant proceedings, in circumstances where the husband did not oppose leave for the non-parties to appear. The husband has been afforded the opportunity to respond to and be heard in relation to the non-parties submissions. I see no reason why I should be prevented from making an order in favour of the non-parties if, upon application of s 117(2A), such an order is justifiable on the facts and circumstances of this case.
Discussion
I note that according to the authorities discussed above, this Court has the power and discretion pursuant to s 117(2) of the Act and subject to certain circumstances existing as outlined in the case law, to make a costs order against (and indeed for) a non-party to a proceeding, including in interim proceedings.
The procedural issue of allowing the non-parties to be heard on the making of any costs order involving them does not arise here as it is the non-parties’ application for costs against the husband which is in consideration, and all the non-parties appeared before me to make that application on 12 October 2007 and they then provided written submissions to that end. In relation to this point I further note that all the non-parties are legally represented. In addition, the husband appearing in person, was also afforded the opportunity to be heard both orally and in writing.
I turn now to consider whether in the circumstances, the non-parties took an active part in the conduct of the litigation and whether they had an interest in the subject of the litigation.
In relation to whether the non-parties actively participated in the conduct of the proceedings I note that they attended the hearing for the entire day, though during the course of the day I heard from the husband and the legal representatives for the wife and made directions and orders regarding matters which did not concern the non-parties. I further note that I dismissed the husband’s relevant application on its form and not on its merits, leaving the substance of the application undetermined. Despite this, the non-parties made submissions in response to the application and as such they can be said to have played an active part in the proceedings;
Putting aside the factual dispute as to whether the husband invited the non-parties to attend and be heard in the proceedings, it is clear, despite the husband’s submissions to the contrary, that the non-parties had a clear interest in the husband’s application. The husband submits that the non-parties were neither required to attend, nor were their interests likely to be affected by the orders he was seeking. He says (original emphasis):
Should the matter have … proceeded and been heard, and if the orders I was seeking against the wife were made, it is my submission there was no damage to be done to the wife’s creditors.
It would only be upon the hearing of any costs application against the wife before the Court [that there] could … be any risk to the interests they claim. I submit it then might have been appropriate for Meredith, Taussig and Impact to have approached the Court to be heard, and most likely seek their own application to be joined as parties in the matter.
…
It is by no means a fait accomplie that anyone’s interests, claimed or otherwise, would have been affected as a direct result of the orders sort, which was essentially to temporarily place the monies to one side and allow the court to carry out its function.
Meredith and Taussig and Cherrie submit their interests were at stake, saying in their written submissions:
… [we] were invited by the husband to attend at Court and be heard in the proceedings to protect [our] interests given the orders the husband was seeking affecting [us].
Impact Capital submits similarly:
… the husband sought orders that affect the interests of Impact Capital Limited and therefore Impact Capital Limited was forced to appear and seek leave of the Court to make submissions against the making of the orders sought by the husband.
The very nature of the order the husband was seeking, that is an order pursuant to ss 106B and 90AF(2) of the Act, that would effectively prioritise his interests over the non-parties’ interests, illustrates that the interests of the non-parties would have been affected and were part of the subject of the proceedings. The language of the relevant sections confirms this. Section 106B begins with the subsection:
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
Section 90AF(2) reads as follows:
In proceedings under section 114, the court may make any other order, or grant any other injunction that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
Considering the above circumstances where the non-parties played an active part in proceedings which concerned their interests, and noting that my discretion should be exercised sparingly, I conclude that the special circumstances which would allow me to exercise the power pursuant to s 117(2) to make a costs order in favour of a non-party exist. Whether I now make such a costs order and the form of any such order is to be determined with reference to the factors listed in s 117(2A).
CONSIDERATION OF s 117(2A) FACTORS IN DETERMINING WHAT COSTS ORDER (IF ANY) SHOULD BE MADE
In my judgment of 12 October 2007 concerning the dismissal of the husband’s application of which the non-parties were interested, I said:
25.Had [the non-parties] been joined and the application had been dismissed I would in the normal course have made a costs order having regard to the matters set out under s 117(2A) in the circumstance of these proceedings. However, they are not parties and I was not sure at that time as to what power I had to make a costs award in their favour on a party to party basis under the legislation.
I note that in reliance on my above comments, Meredith and Taussig Cherrie did not provide written submissions addressing the matters listed within s 117(2A) on the assumption that if the power was found, a costs order would be made. However now, for the sake of completeness and with the opportunity to put my reasons into written form, I will detail my consideration of the s 117(2A) factors which lead me to my decision regarding what costs order, if any, should be made as against the husband in favour of the non-parties. I believe it is important to show the reasoning behind the exercise of my discretion, particularly considering Kirby J’s comments noted earlier about challenges to costs orders involving non-parties on the bases of procedure and exercise of discretion.
Section 117(2A) of the Act provides as follows:
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.
I note briefly that s 117(2), which provides the power to make a costs order in favour of a non-party, is subject to s 117(2A) and despite the references in s 117(2A) to circumstances relating to the “parties” of the proceedings, I will consider the s 117(2A) matters in relation to the husband and the non-parties as it seems unlikely that the wording of s 117(2A) intends to exclude consideration of the circumstances of the subjects of a costs order.
(a) The financial circumstances of each of the parties to the proceedings
The husband details his financial circumstances in his affidavit filed 12 October 2007 with reference to findings made by Moore J in her Honour’s judgment of 21 March 2007. The husband lists his “current money at hand at the bank” as follows:
E Pty Ltd $5,751.73
Personal $812.45
Total $8,021.06
While $8,021.06 is not the correct addition of the above amounts, it would be the correct total if the figure listed as ‘personal’ were to correctly include the husband’s purported cash assets according to his affidavit and annexures which list his personal bank account holdings as $1,812.45, $454.85 and $2.03.
The husband then lists his “immediate current debts” as:
Credit card $7,892.27
Legals $1,861.86
Accountant $3,567.30
Monthly mortgage $2,330.00
Council rates $459.00
School fees $3,690.00
Tax liability $6,363.00
ICL $16,762.00
Total $42,925.43
The husband goes on to detail his other liabilities as:
E Pty Ltd’s debts $1,742.40
D Pty Ltd’s GST debt $10,000.00
Debts to family and friends $295,000.00
Further legal costs $79,888.90
Mortgage $290,579.01
These liabilities total $677,210.31. However, it is apparent there is an overlap with the listing of monthly mortgage repayments and the entire mortgage itself. There may be further overlaps but I cannot be sure. The husband also notes that he has met the costs involved in spending time with the children (airfares etc) in the sum of $1,809.40. On the above figures, the husband could be described as being in dire straits in terms of his finances.
With reference to the reasons of Moore J in her Honour’s judgment of 21 March 2007, the husband presents the situation that he is not currently in paid employment though following the conclusion of Court proceedings will be in a position to re-exercise his earning capacity. He refers to part of the following passage from Moore J’s reasons for judgment which I include in its extended form:
92.… This litigation no doubt has represented a significant preoccupation for [the husband] and his commitment to maintaining contact with the children in difficult circumstances by frequent travel to Geelong are both factors that are likely to have impacted on his opportunities for work these past two years or so. But with the proceedings behind him and his responsibilities with the children determined, there seems to be no reason why he could not re-position back in the industry where he has worked for many years in one role or another, consistent with his family responsibilities … He is not presently under any ongoing contract to provide services … and he was for a time represented by an agent but that relationship appears to have languished. But [the husband] maintains he is actively seeking employment and it would be right to see him as capable of earning a reasonably comfortable income in the future notwithstanding his responsibilities for three children, without being able to say precisely what figure that will be.
Impact Capital submits that the husband has the financial means to pay the costs order sought with general reference to the findings of Moore J. Neither Impact Capital, Meredith nor Taussig and Cherrie make submissions as to their financial circumstances. Nevertheless, it seems safe to assume without any evidence to the contrary, that Meredith, Taussig and Cherrie and Impact Capital are in satisfactory financial circumstances as operating businesses. I say hesitantly that the non-parties are most probably in the position where they are able to absorb their own costs.
(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
This factor is not applicable.
(c) The conduct of the parties to the proceedings in relation to the proceedings
Impact Capital submits that the husband’s application, which sought to prioritise his claims above those of the non-parties’ in relation to a not yet made costs order against the wife in the substantive and other proceedings, was unfounded. Impact Capital further submits that when they questioned the husband about his inappropriate application and on what basis he was making it, the husband was not forthcoming.
While not raised directly in Meredith and Taussig and Cherrie’s written submissions, an issue arises regarding the husband’s alleged “invitation” to attend at the proceedings. Meredith and Taussig and Cherrie submit that they were “invited by the husband to attend at court and be heard in the proceedings to protect their interests given the orders the husband was seeking affecting them”. The husband submits in response:
[That assertion is] drawing a long-bow indeed, when the only communication to Meredith and Taussig was by way of courtesy to advise them that I intended to seek orders against the wife. There is no advice from me to them that they should “attend and be heard”, nor that they needed to “protect their interests”.
…
I did not advise Impact of the hearing or my application for orders against the wife. It must be open to the Court to assume this advice came to Impact from either the wife, Meredith or Taussig.
(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
This factor is not applicable.
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings
I repeat that the husband’s application was dismissed without any determination of its merits or substance. In this regard the husband submits that his application was not wholly unsuccessful. On the other hand, Impact Capital submits that the husband was wholly unsuccessful as it’s application was dismissed, albeit not on its merits.
(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings
This factor is not applicable.
(g) Such other matters as the court considers relevant
In relation to any other matters the Court may have regard to, Impact Capital submits again that the husband’s application was inappropriate, unfounded and incorrect at law. They submit:
… it is important to repeat here … that the Family Court cannot be used as a tool by a party to re-prioritise or change the ranking of creditors. Part VIIIAA was never intended to be used as a tool to do what the husband has sought to do on 12 October 2007.
This is not the appropriate time to analyse the law in that regard but I note that Impact Capital’s proposition may not necessarily be entirely correct. I point to Re Q (Damages for sexual assault) (1995) FLC 92-565 and Nygh J’s comments in Af Petersens and Af Petersens (1981) FLC 91-095 at 76,669. I further note that as the husband’s application was not determined on its merits, I am not in the position to conclude whether the application was unfounded at law.
Impact Capital also submits that in the substantive proceedings before Moore J where the husband was represented by senior counsel and with his solicitors in attendance, he was made aware of the wife’s liabilities to the non-parties. Impact Capital submits that at that time the husband had the opportunity to raise any concerns he had in relation to any potential liability the wife may owe to him.
Conclusion
I find that having regard to the above factors, a costs order should be made against the husband in favour of the non-parties. Weighing in favour of making a costs order against the husband are his missed opportunity to raise the liabilities issue before Moore J, and the fact that his application was dismissed. This represents a wholly unsuccessful application, despite it not being determined on its merits.
As such, I allow the applications of Meredith, Taussig and Cherrie and Impact Capital seeking costs against the husband. I will make an order that the husband pay the costs of Meredith, Taussig and Cherrie and Impact Capital.
INDEMNITY COSTS OR PARTY/PARTY COSTS
I believe that in the circumstances an order for the payment of party/party costs is appropriate. I do not believe that the required exceptional circumstances exist that would make the granting of indemnity costs appropriate. I do not intend to engage in a comprehensive analysis of the appropriate circumstances in which to award indemnity costs save for noting the following.
The scale of costs to which party/party costs adheres already reflects considerations of complexity, difficulty and responsibility and should only be departed from in exceptional circumstances. The Full Court (Strauss, Lindenmayer and Bulley JJ) in Kohan and Kohan (1993) FLC 92-340 said at 79,614 (full citations omitted):
The intent of s 117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the court may make such order as the court considers just. As we have pointed out, the court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By o 38 r 2, the provisions of o 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. Order 38 rule 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v Wright (No. 2); Wentworth Rogers (No. 5); (Hobartville Stud v Union Insurance Co.’
Indemnity costs orders are still an exception in this and other jurisdictions.
Sheppard J of the Federal Court in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 also noted that indemnity costs should only be ordered in exceptional circumstances, saying at page 256:
In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course …
Sheppard J went on to note some circumstances which may qualify as exceptional circumstances, saying at page 257 (full citations omitted):
I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also be Gummow J in Thors v Weekes); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (e.g. Messiter v Hutchinson; Maitland Hospital v Fisher (No. 2); Crisp v Kent); and an award of costs on an indemnity basis against a contemnor (e.g. Megarry V-C in EMI Records).
Later, the Full Court (Lindenmayer, Holden and Mullane JJ) in Yunghanns v Yunghams (above) commented that the category of circumstances which would satisfy an order for indemnity costs is not closed. The Court said (full citations omitted):
31.It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd.
I find that in this current case before me there are no circumstances whether relating to collateral purposes, fraud or other issues, to warrant the making of a costs order against the husband on an indemnity basis. As such, I propose to order that the husband pay the costs of the non-parties, Meredith, Taussig and Cherrie and Impact Capital, on a party/party basis.
CONCLUSION
The circumstances of this case invoke the court’s power to make a costs order involving a non-party according to s 117(2) of the Act. I have found that a costs order should be made against the husband in favour of the non-parties and order as follows:
(1) The costs of Gayle Meredith, Michael Taussig and Debra Cherrie and Capital Impact Limited in respect of an application in a case heard on the 12 October 2007 be paid by the applicant Mr Hartnett. Such costs and disbursements to be on a party/party basis as agreed between the parties or if not agreed determined under the Rules of the Court.
I certify that the preceding paragraphs 1 to 66 are a true copy of the reasons for judgment of the Honourable Justice Benjamin
Associate:
Date: 14 December 2007
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Costs
-
Jurisdiction
-
Remedies
4
3
1