Hayes & Hayes (No. 2)
[2021] FamCA 201
•15 April 2021
FAMILY COURT OF AUSTRALIA
Hayes & Hayes (No. 2) [2021] FamCA 201
| File number(s): | PAC 1553 of 2018 |
| Judgment of: | HARPER J |
| Date of judgment: | 15 April 2021 |
| Catchwords: | FAMILY LAW – COSTS – Where the mother seeks indemnity costs against the father – Where the father made misleading statements in his evidence and failed to disclose important evidence about his mental health – Where offers of settlement made to the father but were unreasonably rejected – Where the father failed to provide documents regarding his mental health resulting in delay – Whether exceptional circumstances are made out justifying indemnity or solicitor and client costs. |
| Legislation: | Family Law Act 1975 (Cth) ss 117 Family Law Rules 2004 (Cth) rr 1.04, 1.06, 1.07, 1.08, 19.18 Supreme Court Rules 1987 (NR) r 1.10 |
| Cases cited: | Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 Aon Risk Services Australia LTD V Australian National University (2009) 239 CLR 175 B v J (2006) FLC 93-259 Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 Cachia v Hanes (1994) 179 CLR 403 Harris & Dewell and Anor (No. 2) (2018) FLC 93-863 Hayes & Hayes [2020] FamCA 1057 Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish and Anor (2005) 191 FLR 294 Latoudis v Casey (1900) 170 CLR 534 Northern Territory v Sangare (2019) 265 CLR 164 Oshlack v Richmond River Council (1998) 193 CLR 72 Prantage & Prantage (Costs) [2014] FamCA 850 Re JJT; Ex Parte Victoria Legal Aid (1998) 195 CLR 184 |
| Number of paragraphs: | 55 |
| Date of last submission/s: | 29 January 2021 |
| Place: | Sydney |
| Solicitor for the Applicant: | Swaab Attorneys |
| Solicitor for the Respondent: | The Respondent appeared in person |
ORDERS
| PAC 1553 of 2018 | ||
| BETWEEN: | MS HAYES Applicant | |
| AND: | MR HAYES Respondent | |
ORDER MADE BY: | HARPER J |
DATE OF ORDER: | 15 APRIL 2021 |
THE COURT ORDERS THAT:
Within 60 days, the Respondent Father pay the Applicant Mother’s costs of the parenting proceedings on an indemnity basis from 3 June 2020.
Within 28 days of the date of these orders, each of the Applicant Mother and the Respondent Father contribute $9,280 to the costs of the Independent Children’s Lawyer, to be paid as the Independent Children’s Lawyer directs.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hayes & Hayes has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J
INTRODUCTION
These are parenting and property proceedings between the Applicant Mother, Ms Hayes (“the mother”) and the Respondent Father, Mr Hayes (“the father”).
There are two children of the relationship, X born in 2004 and currently 16 years of age, and Y born in 2007 and currently 13 years of age (together referred to as “the children”).
On 11 December 2020, I delivered judgment in relation to the parenting aspect of the proceedings. By consent, I made orders that the mother have sole parental responsibility for the children and that the children are to live with her. I also made orders, not by consent, that the father spend supervised time with the children until the date of X’s 17th birthday and thereafter the father is to spend unsupervised time with the children. I also dismissed a contravention application filed by the father: Hayes & Hayes [2020] FamCA 1057 (“the primary judgment”).
In the primary judgment I made orders that if any party sought an order for costs, an appropriate application to the Court may be made within twenty-eight (28) days of 11 December 2020, to be filed and served within that time period and a copy forwarded to my Chambers.
The mother filed an Application in a Case on 23 December 2020 seeking a costs order. The father filed a Response to the mother’s Application in a Case on 29 January 2021.
The Independent Children’s Lawyer filed a costs notice seeking a costs contribution of $9,280 from each parent.
SHORT PROCEDURAL HISTORY
The history of the matter was outlined in detail in the primary judgment (see [22] - [47]). Repetition is unnecessary here. I will refer to specific aspects of the history only as necessary in these reasons.
ORDERS SOUGHT AS TO COSTS
The mother’s Application in a Case for costs sought the following orders:
1. That the Respondent Father, Mr Hayes ("the Respondent") pay to the Applicant's Mother, Ms Hayes ("the Applicant"), her legal costs and disbursements of, and incidental to, the proceedings on:
1.1 An indemnity basis fixed at the sum of $238,994, with such sum to be paid within six months from the date of these orders; or
1.2 In the event that Order 1.1 is not made, then the amount of $121,510 which represents the costs from 9 September 2019 to date; or
1.3 In the event that Order 1.2 is not made, then such costs as calculated in accordance with the scale in the Family Court Rules.
The father’s Response to the mother’s Application in a Case sought in summary that her application for costs be dismissed.
THE LEGAL PRINCIPLES
In proceedings to which the Act applies, the starting point is that each party shall bear his or her own costs: s 117(1). If, however, the Court is of the opinion that there are justifying circumstances, the Court may make such order as to costs and security for costs as the Court considers just: s 117(2). In Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44, the majority of the High Court (Gaudron, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that s 117(2) referred to costs in the conventional sense, that is, as indemnity for another’s liability for professional fees and out of pocket expenses reasonably incurred in the litigation (see eg Hayne J at [97]). This position has been followed in the Full Court (B v J (2006) FLC 93-259; [2006] FamCA 256).
When considering what, if any, order for costs should be made, the Court must have regard to the factors set out in s 117(2A).
(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.
It is well settled that no one factor in s 117(2A) has priority, nor must more than one factor be satisfied; rather, any one factor may be sufficient; Prantage & Prantage (Costs) [2014] FamCA 850 at [12] (“Prantage”); Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish and Anor (2005) 191 FLR 294; (2005) 33 Fam LR 123; [2005] FamCA 158 [41].
The mother also seeks an order that the Court should order costs in a specified amount. The alternative specific amounts of $238,994 and $121,510 according to the affidavit evidence of the mother reflect full or partial indemnification.
Rule 19.18 of the Family Law Rules 2004 (Cth) is therefore also relevant:
Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b) as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c) to be calculated in accordance with the method stated in the order; or
(d) for part of the case, or part of an amount, assessed in accordance with Schedule 3.
(2) If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
(3) In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party's behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer's conduct has been improper or unreasonable;
(e) the time properly spent on the case, or in complying with pre-action procedures; and
(f) expenses properly paid or payable.
DISCUSSION
The financial circumstances of the parties
At the time of the primary judgment, the mother was employed as an office manager. According to her affidavit filed 23 December 2020, at paragraph 34, the mother continues to be employed in this role. In the mother’s Financial Statement filed 6 May 2020, her earnings are said to be approximately $53,700 per annum, although her weekly income is said to be $1,311 per week which yields $68,172 per annum.
The mother continues to be the primary carer for the parties two children, and in that role, is unable to work on a full time basis (mother’s summary of argument filed 3 February 2021, paragraph 14). The orders made in the primary judgment confirm this position.
At the time of the primary judgment, the father was employed as a finance manager and earnt $80,000 per annum plus superannuation (at [90]). The father is currently employed full time in this role and works 40 hours per week, earning a net monthly income of $5,156.67 (father’s affidavit filed 29 January 2021, paragraph 13 and 18). His annual net income is therefore $61,880.04.
As pointed out in the primary judgment, on 3 February 2017, the father was banned from acting as a director or receiver and manager, and had his license to act as a finance professional cancelled for five years (at [18]). I note that the father will therefore be reinstated as a finance professional in approximately 12 months (father’s affidavit filed 29 January 2021, paragraph 6). The father contends that he will become bankrupt if a costs order is made against him. If he is bankrupt he cannot be a finance professional (father’s affidavit filed 29 January 2021, paragraph 6). I accept bankruptcy would adversely affect his capacity to earn an income.
Legal Aid
The father received a grant of Legal Aid for the final hearing. The grant was in relation to the “Live with/Spend time with” issues. The grant was terminated after the fifth day of the final hearing during the short adjournment period, because the father notified Legal Aid that he had obtained new work (father’s affidavit filed 29 January 2021, paragraph 29).
Conduct of the parties
It is a basic principle that an order for costs is compensatory and not to be used to punish: (Latoudis v Casey (1990) 170 CLR 534 at 543, 562 – 563, 566 – 567; Cachia v Hanes (1994) 179 CLR 403 at 410; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (“Oshlack”) at [1]. Costs are not awarded as a reward for a litigant's success: Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 at [33].
Section 117(2A)(c) makes the conduct of the parties a necessary consideration, being conduct “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, admission of facts, production of documents and similar matters”.
In Oshlack, McHugh J at [69] referred to “some sort of misconduct” which disentitles a party to the beneficial exercise of the discretion, citing the formulation of Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, 874. McHugh J explained:
“Misconduct” in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; … [footnotes omitted]
Section 117(2)(c) is not expressly confined to misconduct. It addresses any conduct “in relation to” the proceedings.
The mother argues that the length of the hearing was increased from five to seven days; that the father’s evidence was misleading and unreliable; that the father failed to disclose his admission to N Hospital; and that the father knowingly made a number of false allegations or statements in the proceedings which impacted the litigation and costs incurred by the mother.
At paragraph [91] of the primary judgment I said:
[91] I found the father’s evidence to be unreliable. For example, at [286] of his Trial Affidavit the father states: “[t]here is no disentitling conduct on my part to preclude me from continuing to be the father of the children. No domestic violence [sic] and no substance abuse issues”. The evidence discussed later in these reasons makes clear that these assertions are not borne out. The detailed discussions of the events of 16 June 2018 under s 60CC(2)(b) and of the events of 1 November 2019 and 31 December 2019 under ss 60CC(3)(f) support this conclusion. They show the father has not been frank about his mental health, and has given versions of events which I have been unable to accept.
At [241] in the primary judgment I discussed the events of 1 November 2019, when the father was taken by ambulance to N Hospital, as follows:
[241] The father gave no evidence about this incident at all in his affidavit. He was, however, cross-examined extensively about what took place. It was clear that on that night father ingested some Valium together with scotch whiskey. There was a factual dispute about the number of Valium taken by the father and whether he was at the time suffering suicidal ideation or other mental health problems. The father contended that he took at the most two or three Valium. However, according to the notes of health care professionals at hospital, the father mentioned that he had taken up to 48 Valium together with a substantial amount of alcohol.[1] In his oral evidence the father contended that in fact all healthcare professionals were mistaken, to the extent they had recorded information conveyed by him which was at odds with his own version. The following discussion explains why I am unable to accept the father’s evidence about this incident.
At [248] I found that the father’s assertions that he took only two or three pills with a small amount of scotch was a conscious attempt to muddy the waters with an eye to this litigation.
[248] I am unable to accept the father’s claims that he took only two or three Valium and only one or two glasses of “a two finger amount of scotch”. His evidence in this regard receives no support from the evidence of Mr Hayes senior...The fact that he chose to make no mention of a serious incident, which could reflect on his parenting capacity, in his affidavit is consistent with an inclination to suppress or minimise evidence which he considered to be adverse to his case, rather than focus on the likely impact of his behaviour on the children. In his oral evidence, the father conceded he knew as a matter of course that the incident would be recorded in the N Hospital subpoena material but close nonetheless not to mention it in his evidence. Counsel for the mother drew attention to the hospital progress notes which records that the father was “[c]oncerned that records [would] be subpoenaed & used against him in family court”. This shows that, after the initial crisis passed in hospital, the father was clearly aware of the possible impact of his actions on his case in the proceedings. I infer it more likely than not that the father’s initial statement recoded in the Ambulance Electronic Medical Record, that he took 48 tablets, with up to “500 mls of scotch” reflects the truth and his later assertions that he took only two or three pills, with a small amount of scotch, was a conscious attempt to muddy the waters with an eye to this litigation. His claim that healthcare professionals had simply been mistaken in their notations in hospital notes is not credible; for this to be true, it would be necessary to accept that at least three healthcare professionals over a period of three days made the same or similar mistake.
In Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [25] (“Sangare”), the High Court referred to unreasonable delay or a want of cooperation required of litigants to ensure the “just resolution of the real issues in civil proceedings with minimum delay and expense” (citing Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 210 [90]; [2009] HCA 27 and Supreme Court Rules 1987 (NT), r 1.10).
Further, in Sangare, the Court makes clear that not only delay and expense but the relevant Court rules should be examined by the Court against the general circumstances of the case when exercising its discretion on costs. In this Court, Rule 1.04 of the Family Law Rules 2004 (Cth) (“the Rules”) specifies a “main purpose” of the Rules, which is “to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case”. The Court is to apply the Rules to promote and achieve the main purpose: Rules 1.06 and 1.07. Rule 1.08 of the Rules imposes an obligation on, amongst others, the parties to promote and achieve the main purpose of the Rules, including readiness for Court events, assisting the just, timely and cost effective disposal of cases, and being satisfied there is a reasonable basis for alleging, denying or not admitting a fact.
The mother also submits that the increase in hearing time was a result of the Court being required to adjudicate on whether or not the father could rely on a transcript of an audio recording made by X, who was 15 years old at the time. I ultimately excluded the transcript. The argument on a voir dire utilised approximately one day of hearing time which caused delays (mother’s summary of argument filed 3 February 20201, paragraph 21.1-21.2).
This evidence was excluded under s 69ZX(2) of the Act because it was gathered by X as a result of an unhealthy alignment to the father. The father characterised the evidence gathered by X as an example of his children being empowered to seek the truth. At [214], [215] I said:
[214] During cross-examination, Dr P pointed out that:
…the father has failed to understand that the children have not empowered themselves. The children have become embroiled in a terrible conflict. They have felt responsible for it, and they have acted in ways that are attempting to manage their own anxiety and attempting to manage a terrible loyalty bind.
[215] As Dr P pointed out, the father appeared unable to grasp that these are not healthy signs of truth seeking children, but signs of distressed and psychologically unwell children. This is also consistent with the evidence, discussed earlier in these reasons, that the children have been made to see the father as a friend and feel responsible for him.
At [103] - [104] the majority of the Full Court in Prantage emphasised that the conduct of a party as a parent needs to be distinguished from the conduct of a party as a litigant, although the same conduct could relevant to both roles. The delays caused by the voir dire had their genesis in the conduct of the father a parent. However, I am satisfied that the voir dire should have been unnecessary. The father’s conduct as a parent played directly into his conduct as a litigant. I am satisfied it is appropriate to take this into account.
I also take into account that the father eventually consented to orders that the mother have sole parental responsibility for the children and that they live with her.
The father’s conduct described above is relevant to a costs order. I am satisfied his conduct as a litigant resulted in the trial taking longer than necessary and failed to promote or help achieve the main purpose of the Rules.
Offers in Writing
The mother also points to the father rejecting two offers of settlement.
The first offer of settlement was provided to the father on 3 September 2019 which provided for the children to live with the mother and spend time with the father, on a gradual basis:
(a)Six hours each Saturday, supervised, each week;
(b)Conditional upon compliance with providing negative test results for illicit substances and graduating to after school Friday to before school Monday, each alternate week.
I note that the final hearing was listed for 29 June 2020 to 3 July 2020 and was then adjourned part heard to 22 July 2020 to 23 July 2020.
At the time of the first settlement offer, the final hearing was approximately nine months away. The parties had not filed their trial affidavits. The incidents of 1 November and 31 December 2019 had not occurred.
The second offer of settlement was provided to the father on 3 June 2020, which provided for the children to live with the mother and spend time with the father, on a gradual basis, which in summary was:
(a)For a period of three months, on a supervised basis, from 11:00 am to 5:00 pm Saturday and Sunday, each fortnight;
(b)Conditional upon compliance with providing negative test results for illicit substances, then for a further one month from 11:00 am to 5:00 pm Saturday and Sunday each fortnight, unsupervised, and then;
(c)From after school Friday, or 3:30 pm in the event of a non – school day, to before school Monday, or 8.30 am in the event of a non-school day, each fortnight.
The second offer of settlement was provided to the father just under a month prior to the final hearing.
The father, in his affidavit filed 29 January 2021, states that he considered the two offers to settle the proceedings that were made by the mother. He states that he provided counter offers to the mother and that they were rejected.
Ultimately, neither party accepted the offers of the other.
Both offers made by the mother reflected an outcome which was better, from the father’s point of view, than both the mother’s ultimate position at trial and the result in the primary judgment. In particular both offers proposed a gradual increase in time with the father culminating in overnight time. All the orders made in the primary judgment allow for a progression from supervised to unsupervised time, there is no allowance for overnight time, and the children’s time with the father is limited to daytime on the third Sunday of each month.
Wholly unsuccessful
The mother contends that the father was wholly unsuccessful in the orders sought by him (mother’s affidavit filed 23 December 2020, paragraph 20).
The father contends that the mother was wholly unsuccessful in the orders that were sought by her in the proceedings and relies on the fact that orders for no contact and for supervision until age 18 were not made (father’s affidavit filed 29 January 2021, paragraph 36). As pointed out in the primary judgment, at trial the mother withdrew her support for any unsupervised time with the father (at [54] - [55]. I did not accept her proposal.
The primary judgment makes clear that neither party was wholly unsuccessful.
Order for Costs Justified
I am satisfied that the conduct of the father in the proceedings warrants an order for costs in favour of the wife. I am satisfied the father’s financial circumstances do not preclude such an order. I am satisfied he has the capacity to earn a reasonable salary, according to his own evidence. The refusal of the wife’s first offer on 3 September 2019 I do not consider to be unreasonable. Although that offer allowed for a progression to overnight unsupervised time for the children with the father, as pointed out, the parties’ cases for trial had not yet crystallised in their trial affidavits. However, by 3 June 2020, the father should have known clearly what the mother’s case was, and he knew he had serious problems which resulted in the incident of 1 November and 31 December 2019. In my view, his refusal of the mother’s offer if 3 June 2020 was unreasonable. I am satisfied the father should pay the mother’s costs from 3 June 2020.
There remains the question whether this should be on the usual party/party basis or on an indemnity basis.
INDEMNITY COSTS
The award of indemnity costs in this Court has regularly been called a significant departure from the normal standard. In Harris & Dewell and Anor (No.2) (2018) FLC 93-863; [2018] FamCAFC 180 the Full Court said at [23] – [25]:
[23] In Kohan and Kohan (1993) FLC 92-340 (“Kohan”), the Full Court held, in applying the principles expounded by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225, that an order for indemnity costs represents a “very great departure from the normal standard”. In the later decision of the Full Court in Prantage & Prantage, Thackray and Ryan JJ referred to Kohan and other authorities in the Full Courts of both this Court and the Federal Court of Australia as well as the state appeal courts. Their Honours concluded ([86]) that the “usual rule” continued to apply in respect of awards of costs in this Court notwithstanding the Full Court accepting that the difference between party/party costs and a party’s actual costs has continued to grow significantly.
[24]. That proposition also derives support from what Callinan J said in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26; (2001) 179 ALR 406 at [40] His Honour said that an order for indemnity costs should “be exceedingly rare, as they have a tendency to encourage extravagance and put the quantum of legal fees beyond the effective scrutiny of the courts and their taxing officers”.
[25] The rarity of an order for indemnity costs can also be seen illustrated by the comments of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2), referred to by their Honours in Prantage (at [102] – [103]). Lindgren J said that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation.”
In Prantage, at [152] Murphy J pointed out that reference to “a great departure” is not a fetter on this Court’s discretion to award costs or indemnity costs if justice so requires it, citing Oshlack at [134]; “rather it recognises that an order for indemnity costs, has a particular context in this jurisdiction”.
I note that the mother made submissions based on the decision in Prantage at [121] where the Full Court considered the terms of the now repealed s 117AB of the Act. As I understood her point, the mother contended that, putting aside s 117AB, I should hold that the father made knowingly false allegations for forensic advantage, which constituted conduct justifying an indemnity costs order. I accept this submission.
The unreasonable refusal of offers can be the basis for an award of indemnity costs.
CONCLUSION
I am satisfied that the father’s conduct in making misleading statements in his affidavit, his failure to disclose important evidence and seeking to adduce evidence of recordings made by one of his children, all for forensic advantage, as well as unreasonable refusal of the mother’s offer on 3 June 2020 justify a departure from the position expressed in s 117(1). I am also satisfied that costs on an indemnity basis in favour of the mother are justified after 3 June 2020.
I will order the father to pay the costs of the mother of the proceedings on an indemnity basis from 3 June 2020.
As already noted, the Independent Children’s Lawyer filed a costs notice seeking a contribution of $9,280 from each of the parties. The parties are not impecunious. They have sufficient resources to make such a contribution. The Court received valuable assistance from the Independent Children’s Lawyer. I am satisfied each of the parties should also contribute Independent Children’s Lawyer.
| I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. |
Associate:
Dated: 15 April 2021
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