Hearl & Digby

[2020] FamCA 474

FAMILY COURT OF AUSTRALIA

HEARL & DIGBY AND ORS [2020] FamCA 474

FAMILY LAW – INDEMNITY COSTS – extensive review of authorities, mostly at High Court level – not appropriate to make such an order on this application – costs application refused.

Family Law Act 1975 (Cth) ss 117(1), 117(2), 117(2A)

Andrews v Barnes (1888) 39 Ch D 133
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Corporation of Burford v Lenthall (1743) 2 Atk 551
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Goodridge & Beadle (No 2) [2019] FamCA 786
Harlen & Hellyar (No 2) [2020] FamCA 413
Horne (in his capacity as trustee of the Bankrupt Estate of Narain) v Narain [2017] FCCA 1190
Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242
In the Marriage of Kohan (1992) 16 Fam LR 245
Jones v Coxeter [1742] 26 ER 642
Knight v F.P. Special Assets Ltd (1992) 174 CLR 178
Latoudis v Casey (1990) 170 CLR 534
McKewins Hairdressing & Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation (2000) 74 ALJR 1000
Northern Territory v Sangare (2019) 265 CLR 164
Norton v Morphett (1995) 83 A Crim R 90
NSW Medical Defence Union Ltd v Crawford & Bailey (1993) 31 NSWLR 469
PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24
Penfold v Penfold (1980) 144 CLR 311
Pirrotta v Citibank Ltd (1998) 72 SASR 259
Re JJT; ex parte Victoria Legal Aid (1998) 195 CLR 184
Re National Safety Council of Australia, Victorian Division (in liq) (No 2) [1992] 1 VR 485
Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Rosniak v Government Insurance Office (1997) 41 NSWLR 608
Ruhani v Director of Police (2005) 222 CLR 489
Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331
Yeo & Rambaldi (as trustees of the bankrupt estate of Arifovic) v Arifovic & Anor (No.2) [2017] FCCA 1189

APPLICANT: Mr Hearl

FIRST RESPONDENT: Ms Digby

SECOND & THIRD RESPONDENTS: Mr Fassler & Ms Fassler

INDEPENDENT CHILDREN’S LAWYER: Danielle Webb Lawyer

FILE NUMBER: MLC 837 of 2018

DATE DELIVERED: 12 June 2020

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: The Honourable Justice Wilson

HEARING DATE: 22 May, 1 June 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: D. Harris

SOLICITOR FOR THE APPLICANT: Clark Family Lawyers

COUNSEL FOR THE RESPONDENT: Not applicable

SOLICITOR FOR THE RESPONDENT: Not applicable

COUNSEL FOR THE INTERVENOR: S. Taylor

SOLICITOR FOR THE INTERVENOR: Batten Sacks

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: Not applicable

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Danielle Webb Lawyer

Orders

1. I refuse the second and third respondents’ application for costs, whether on an indemnity or party party basis, of and incidental to the hearing on 22 May 2020. 

2. This proceeding remain listed for trial on 1 February 2021 for no more than eight days.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

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 r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 837 of 2018

Mr Hearl

Applicant

And

Ms Digby

First Respondent

And

Mr Fassler & Ms Fassler

Second & Third Respondents

And

Independent Children’s Lawyer

REASONS FOR JUDGMENT

Introduction

1. This litigation has been on foot since 2018.  The court file is in its ninth folder.  Over 162 separate documents have been filed.  The case lurches towards its trial date of 1 February 2021 on an eight day estimated duration.

2. Complications arose in this case on the implementation of orders made by me, by Hartnett J and by Bennett J, all since February of this year.  Distilled to its most fundamental components, the factual issues that give rise to this application for indemnity costs arise out of orders that relate to the sale of the property at D Street, Suburb F.  The purchasers of that property have since become parties, having been formally joined pursuant to my orders made on 1 June 2020.  An invitation had earlier been extended for their participation as parties yet they did not take up that invitation until 1 June 2020.  At all events, the minutiae of the conduct of events in the lead up to settlement of the sale of the D Street property became problematic.  On 12 February 2020 Bennett J made orders permitting certain persons retained by the purchasers to enter the premises then occupied by Ms Digby, the first respondent in this proceeding.  Between that date and 23 April 2020 the international COVID-19 pandemic had taken hold causing restrictions to access to the property.  Ms Digby had signalled during debate before me on 23 April 2020 that she was opposed to permitting tradespeople at large entering the property in which she lived.  That prompted a modification by me to paragraph 2 of Bennett J’s orders of 12 February 2020.  It was in the following terms –

   6.Paragraph 2 of the orders made on 12 February 2020 by the Honourable Justice Bennett are amended to read “the wife shall provide access to the identified purchasers’ architect as well as the identified builder of the purchasers and not to other assorted and ill-defined tradespersons, with any entry onto the property to be in compliance with strict stipulations concerning COVID-19.”

3. Then followed arrangements for an internal inspection of the property.  Complications arose in relation to that as well.  Ms Digby told me she had made the necessary arrangements for the inspection to take place.  Conversely, Ms Harris of counsel for the husband and Ms Taylor of counsel for the purchasers said no such arrangements had been made.  Rather than taking the pragmatic step of seeking independent verification of those arrangements and whether a valuer had in fact been not only arranged but confirmed to attend, the parties instead chose to use the forum of a directions hearing on 22 May 2020 to insinuate me into the milieu of their negotiations, something I did not appreciate.  After hearing from Ms Harris, Ms Digby and Ms Taylor with their competing versions of whether in fact a valuer had been booked to attend (this debate consuming an unnecessary amount of court time when common sense should have pointed away from the judge being required to determine whether the relevant telephone call had or had not in fact been made to verify the valuer’s appointment), it transpired that the valuer had in fact been booked to attend and he was scheduled to attend as arranged.  A less implacable approach may have elicited such a response without the cost and inconvenience of a directions hearing. 

4. On 22 May 2020 I made orders in terms of paragraph 3.  That order provided as follows –

   3.The first respondent comply with paragraph 6 of my orders made on 23 April 2020 by allowing access to the [G Street, Suburb F] property to the identified purchasers’ architect as well as the identified builder of the purchasers.

5. Fearing further complications I adjourned this proceeding to a telephone mention on 1 June 2020.  Ms Taylor sought her client’s costs of the application on 22 May.  I reserved costs. 

6. On 1 June 2020 Ms Taylor renewed her costs application.  On behalf of the purchasers she sought indemnity costs of a little over $11,000 from Ms Digby.  She took me to no authority for her application but eventually mentioned the ageing (and, for reasons set out below, largely outdated) authority of In the Marriage of Kohan.[1] I required her to take me through s 117 and 117(2A) of the Family Law Act. She said she relied on the affidavit of her instructor Mr H made 22 May 2020. It did not traverse the factual matters set out in s 117(2A) and instead went to costs at which Mr H charged at the rate of $500 per hour. I received little assistance from that affidavit as it said next to nothing about the factual circumstances of this case subsequent to 23 April 2020 relevant to the orders made on 22 May 2020 and thereafter. In debate with Ms Taylor I asked her what her clients’ party party costs were if the purchasers were unsuccessful in their application for indemnity costs. She was unable to answer saying she needed time to calculate them. That position was most peculiar as –

   a)the purchasers approached this application on the basis that an indemnity costs order was gainsaid, contrary to s 117(1) of the Family Law Act;

   b)the purchasers may, in the absence of persuasion concerning the authorities about indemnity costs, have been successful in an order for party party costs of an incidental to the 22 May directions hearing; and

   c)she was unprepared to tell me whether even party party costs were maintainable under s 117(2A).

   [1] (1992) 16 Fam LR 245.

7. Ms Digby has recently become unrepresented.  She is not legally trained.  Her affidavit which I received in accordance with COVID-19 protocols, was a mix of submission and fact into which Ms Digby injected a considerable amount of personal venom directed to Ms Harris and Ms Taylor.  Even unrepresented litigants should not do that.  Even unrepresented litigants are expected – dare I say, required – to observe basic courtesies in court documentation.  Attributing to counsel information that a deponent characterised (erroneously, as it happened) as “a lie” fell well short of compliance with that courtesy.  On reading Ms Digby’s affidavit I disregarded any reference to words or conduct alleged against Ms Harris or Ms Taylor said to have been otherwise than utterly ethically proper.  Ms Digby should not have made those comments.  As I am the trial judge in this case I will not allow her to denigrate counsel. 

8. Ms Digby opposed the making of a costs order against her.

9. With those preliminary comments, let me move to the relevant principles of law. 

Indemnity costs

1. In two recent decisions I undertook an extensive examination of the law relating to indemnity costs.  The first was Goodridge & Beadle (No 2)[2] and the other was Harlen & Hellyar (No 2).[3]  In the latter I traced the history of equity’s early treatment of costs from Jones v Coxeter,[4] Corporation of Burford v Lenthall[5] and Andrews v Barnes[6] to the modern statements of principle in cases such as Re JJT; ex parte Victoria Legal Aid[7] and prior to that decision, Penfold v Penfold[8] and Knight v F.P. Special Assets Ltd.[9]  Other statements of principle from the High Court have emerged on costs, although not necessarily in relation to indemnity costs, yet in the context of s 117(2A) of the Family Law Act.  In Northern Territory v Sangare[10] the High Court addressed the issue of depriving a successful party of costs by reason of the impecuniosity of the unsuccessful party.  In Helljay v Investments Pty Ltd v Deputy Commissioner of Taxation[11] Hayne J reviewed the Australian authorities on awarding indemnity costs to include Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd,[12] Colgate-Palmolive Co v Cussons Pty Ltd,[13] Re Wilcox; ex parte Venture Industries Pty Ltd,[14] Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd,[15] Rosniak v Government Insurance Office,[16] Pirrotta v Citibank Ltd,[17] Re National Safety Council of Australia, Victorian Division (in liq) (No 2),[18] Norton v Morphett[19] and EMI Records Ltd v Ian Cameron Wallace Ltd.[20]

   [2] [2019] FamCA 786.

   [3] [2020] FamCA 413.

   [4] [1742] 26 ER 642.

   [5] (1743) 2 Atk 551.

   [6] (1888) 39 Ch D 133.

   [7] (1998) 195 CLR 184.

   [8] (1980) 144 CLR 311.

   [9] (1992) 174 CLR 178.

   [10] (2019) 265 CLR 164.

   [11] (1999) 74 ALJR 68.

   [12] (1988) 81 ALR 397.

   [13] (1993) 46 FCR 225.

   [14] (1996) 72 FCR 151.

   [15] (1995) 36 NSWLR 242.

   [16] (1997) 41 NSWLR 608.

   [17] (1998) 72 SASR 259.

   [18] [1992] 1 VR 485.

   [19] (1995) 83 A Crim R 90.

   [20] [1983] Ch 59.

2. Other more recent statements of principle at High Court level have been made on the question of indemnity costs including those of Gummow J in McKewins Hairdressing & Beauty Supplies Pty Ltd (in liq) v Deputy Commissioner of Taxation.[21]  In Ruhani v Director of Police[22] Kirby J distilled a collection of principles to reveal the circumstances in which an indemnity costs order may be justified.  Those included –

   a)where the opponent’s conduct was “plainly unreasonable” and “pursued for an ulterior motive”, citing PCRZ Investments Pty Ltd v National Golf Holdings Ltd;[23]

   b)where an opponent’s conduct was “undertaken in an unmeritorious, deliberate or highhanded” way, citing NSW Medical Defence Union Ltd v Crawford & Bailey;[24] and

   c)where the opponent has been shown to be guilty of “unreasonable conduct, albeit that it need not rise as high as vexation”, citing Rosniak.[25]

   [21] (2000) 74 ALJR 1000.

   [22] (2005) 222 CLR 489.

   [23] [2002] VSCA 24.

   [24] (1993) 31 NSWLR 469.

   [25] Op cit.

3. While not relevant to this case, the High Court in Stewart v Atco Controls Pty Ltd (in liq) (No 2)[26] held that indemnity costs are enlivened where one party has achieved a more favourable outcome than was recorded in that party’s Calderbank offer.

   [26] (2014) 252 CLR 331.

4. In the course of argument counsel for the second and third respondents relied on the decision in In the Marriage of Kohan[27] as support for the proposition that indemnity costs may be awarded.  True, that case did say that.  However, several things must be said of that authority.  First, judgment in it was handed down in 1992, almost 30 years ago.  Since then, a huge amount of learning at High Court level has evolved on the subject of indemnity costs rendering of highly dubious utility the statement in that case that a court should not depart from ordinary costs rules unless there are circumstances of an exceptional kind justifying such a departure.  The cases surveyed above, especially at High Court level demonstrate that no such statement is presently maintainable. 

   [27] (1992) 16 Fam LR 245.

5. The second reason why in my view In the Marriage of Kohan is unsupportable when examined against the law on indemnity costs in the year 2020 relates to the way the decision of Sheppard J in Colgate-Palmolive has been embraced, seemingly universally, throughout state and federal courts in Australia since 1993.  The distillation of principle to be extracted from the decision of Sheppard J may be stated in the following terms, as I did when sitting as a member of the Federal Circuit Court of Australia in Horne (in his capacity as trustee of the Bankrupt Estate of Narain) v Narain[28] –

   [28] [2017] FCCA 1190.

   16.The genesis of modern learning, at least in the Federal jurisdiction, in respect of indemnity costs is attributable to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[29] (“Colgate-Palmolive”). That was an intellectual property case. Sheppard J addressed an award of costs on an indemnity basis. Relevantly, his Honour said that costs on an indemnity basis could be awarded –

   a)where a party made allegations of fraud knowing them to be false or where that party made irrelevant allegations of fraud;

   b)where evidence of misconduct existed causing loss of time to the court and the other parties;

   c)whether the proceeding was commenced for some ulterior motive;

   d)whether the proceeding was commenced or continued with wilful disregard of known facts or clearly established law;

   e)where allegations were made that ought never to have been made;

   f)where the proceeding was unduly prolonged by groundless contentions; and

   g)where there was an imprudent refusal of an offer of compromise.

   [29] (1993) 46 FCR 225.

6. A costs order does not serve to punish the party against whom the costs order is made. That much was held by the High Court in Latoudis v Casey.[30] There, McHugh J explained that the rationale for a costs order is that it is just and reasonable that the party who has caused the other to incur the costs of litigation should reimburse the successful party for the liability incurred.

   [30] (1990) 170 CLR 534.

7. Of course, as an antecedent issue to be examined, well prior to considering on what basis any order for costs should be made, the provisions of s 117 of the Family Law Act are enlivened. 

8. Since the enactment of the Family Law Act, a statutory regime has replaced equitable and common law concepts relating to costs in family law litigation. No narrow construction is to be applied to the provisions of s 117(1), 117(2) and 117(2A) of the Family Law Act, as was held in Re JJT; ex parte Victoria Legal Aid.[31]  In that case Kirby J was of the view that whatever may have been the source of the court’s power to order costs, on and from the commencement of the Family Law Act the sole repository of the power to make a costs order has been the statute. 

   [31] (1998) 195 CLR 184, 201.

9. Ordinarily each party bears his or her (occasionally its) own costs in family law litigation. That is for the simple reason that s 117(1) of the Family Law Act makes provision for an order to that effect. Section 117(2) of the Family Law Act enables an order to be made pursuant to which one party is ordered to pay costs. Illustrations of costs orders under s 117(2) include indemnity costs orders or an order for costs to be paid on a particular basis or at a particular rate. Those orders are permissible yet in arriving at an order other than one to which s 117(1) applies, the court must undertake an examination and consideration of the elements in s 117(2A) of the Family Law Act. 

10. In this case the second and third respondents sought a costs order in relation to specific appearances.

Application of fact to law

1. In this case I was not persuaded that it was appropriate to make an order under s 117(2) of the Family Law Act. To my mind the usual order under s 117(1) applied. The purchasers did not demonstrate to my persuasion that they were entitled to any order as to costs, still less one to be measured on an indemnity basis. I took the view that Ms Digby had undertaken steps to advance the inspection of the property with a view to advancing the settlement of the purchasers’ acquisition of the D Street property. Sensible communication between the parties could have obviated the 22 May telephone hearing. More than once in this case I have told parties, even unrepresented parties, that I expect and require cooperation in advancing this case to trial. Thus far, since April 2020 when I was first seized of this case, less than cooperative conduct has been exhibited. That must change.

2. I refuse the second and third respondents’ application for costs, whether on an indemnity or party party basis, of and incidental to the hearing on 22 May 2020. 

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 12 June 2020.

Associate:

Date:  12 June 2020