Hirst v Dalton
[2021] FCCA 1697
•26 July 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Hirst v Dalton [2021] FCCA 1697
File number(s): SYG 454 of 2019 Judgment of: JUDGE KEMP Date of judgment: 26 July 2021 Catchwords: CHILD SUPPORT – Costs application where there has been no hearing on the merits. Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44AAA
Child Support (Assessment) Act 1989 (Cth) ss 35, 98C, 98S, 98(1), 114, 117 & Part 6
Child Support (Registration and Collection) Act 1998 (Cth) s 98D
Commonwealth of Australia Constitution Act 1900 s 51(xxxi)
Family Law Act1975 (Cth) s 117
Federal Circuit Court Rules2001 r 21.02 & Schedule 1
Judiciary Act 1903 (Cth) ss 55ZF, 55ZG & 78B
Legal Services Directions 2017 (Cth) Sch 1 Appendix B
Cases cited: ACCC v ANZ (No. 2) [2010] FCA 567
Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
Caporale v Deputy Commissioner of Taxation (2013) 212 FCR 220
Croker v Commonwealth of Australia [2011] FCAFC 25
Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 1568
Davis v Insolvency and Trustee Service Australia (No 3) [2010] FCA 69
Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd (No. 2) [2010] FCA 1224
Deputy Commissioner of Taxation v Croftworth Property Holdings (No 2) Pty Ltd (No 2) [2011] FCA 373
GL v CSR [2010] HCATrans 102
In the marriage of Gould (1993) 115 FLR 371
Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (in liq) [2011] FCAFC 136
Latoudis v Casey (1990) 170 CLR 534
Laurie v Child Support Registrar [2009] FamCAFC 183
Maple v Niu (No 2) [2018] FCCA 26
Melbourne Steamship Co. Ltd v Moorehead [1912] HCA 69; (1912) 15 CLR 333
Metwally v University of Wollongong [1985] HCA 28; 158 CLR 447
Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155
Neetmanski v Child Support Registrar [2009] FMCAFam 200
Nelipa v Robertson and Commonwealth of Australia [2008] ACTSC 16
Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681
Paxton & Child Support Registrar (Costs) [2016] FamCAFC 158
Phillips, In the matter ofStarrs & Co Pty Limited (In Liquidation) v Commissioner of Taxation [2011] FCA 532
Re Minister for Immigration and Ethnic Affairs Ex parte Lai Qin (1997) 186 CLR 622
Scott v Handley [1999] FCA 404; (1999) 58 ALD 373
Tran v Minister for Home Affairs [2019] FCA 1126
Volker and Anor & Dunwell and Anor [2013] FamCAFC 169
Zhao v Suzhou Haishun Investment Management Co Ltd [2020] VSCA 34
Number of paragraphs: 72 Date of last submission/s: 24 February 2021 Date of hearing: 5 February 2021 Place: Sydney Counsel for the Applicant: Mr Matthews Applicant: In person First Respondent: Excused Counsel for the Second Respondent: Ms Davidson Solicitor for the Second Respondent: Sparke Helmore ORDERS
SYG 454 of 2019 BETWEEN: MR HIRST
Applicant
AND: MS DALTON
Respondent
AND CHILD SUPPORT REGISTRAR
Second Respondent
ORDER MADE BY:
JUDGE KEMP
DATE OF ORDER:
26 JULY 2021
THE COURT ORDERS THAT:
1.The applicant pay the costs of the second respondent in the assessed sum of $4,104.00 within 30 days of today’s date.
2.The matter is, otherwise, removed from the active pending cases list.
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 under the pseudonym Hirst v Dalton is approved pursuant to s.110X(4)(h) of the Child Support (Registration and Collection) Act 1988 (Cth).
REASONS FOR JUDGMENT
JUDGE KEMP
INTRODUCTION
These proceedings relate to an appeal filed in this Court in its General Federal jurisdiction on 27 February 2019 against the decision of the Administrative Appeals Tribunal (“AAT)” dated 22 January 2019 in a child support first review matter. That appeal was based on a question of law pursuant to s.44AAA (1) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”).
The decision of the AAT is referred to in Annexure “-1” to the affidavit of Mr B (“Mr B”) affirmed on 23 April 2020 and filed on 24 April 2020. The terms of that decision are incorporated, as if fully set out herein.
The applicant, subsequently, filed an Amended Notice of Appeal on 30 April 2019 pursuant to leave granted by his Honour Judge Street on 4 April 2019. The Amended Notice of Appeal is set out at Annexure “-4” to Mr B’s Affidavit and is incorporated, as if fully set out herein. The Child Support Registrar (“CSR”) was involved as a party in the AAT proceedings but did not actively take part. The decision of the AAT records that the CSR did not attend and was not represented at the hearing.
After Judge Street, in this Court, made orders in Chambers on 18 March 2019 and procedural orders on 4 April 2019 in Court, the matter was then listed before him on 12 September 2019. On 12 September 2019, Judge Street recused himself from hearing the substantive issues in the matter and it was then fixed for hearing before me on 1 October 2019.
On 1 October 2019, the applicant and the first respondent appeared in person and Ms Davidson appeared for the CSR. The matter was then listed for hearing on 6 February 2020. On 6 February 2020, the proceedings were adjourned to 12 March 2020 for mention with the Court noting that the parties appeared to have resolved their dispute, including the appeal and were in the process of settling draft proposed orders to effect the same.
On 12 March 2020, the applicant and the first respondent appeared in person and Ms Davidson appeared for the CSR. By consent, orders were made that the proceedings be withdrawn and dismissed, that there be no order as to costs between the applicant and first respondent with the intention that each of those parties pay their own costs and with the question of costs between the applicant and the CSR, as the second respondent, being reserved. Directions were then provided for the matter to progress.
On 23 April 2020, the CSR filed an Application in a Case which is the present subject of determination. That application sought orders as follows:
On the basis of (a) the likelihood of the applicant’s failure in the appeal, had it proceeded to final hearing; (b) the applicant’s conduct in pursuing the appeal insofar as he challenged the constitutional validity of the Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”); and (c) the circumstances of the case, including the likelihood of the applicant’s failure being twice drawn to his attention by a Judge of this Court, the CSR seeks that the applicant pay its costs of the appeal as agreed or assessed, with the exception of the costs of the hearing on 12 September 2019.
No formal response was filed by the applicant, save that he sought orders as set out in his case outline document, to the following effect:
(1)The second respondent’s application for costs be dismissed.
(2)The second respondent pay the applicant’s costs of and incidental to this application as agreed or as assessed. Such costs to be assessed on an indemnity basis.
The CSR relied, subject to all proper claims as to admissibility and after formal objections were taken, on:
(a)The affidavit of Mr B affirmed on 23 April 2020; and
(b)The affidavit of Mr B affirmed on 22 January 2021.
The applicant (being the respondent to the CSR’s costs application) relied on:
(a)His affidavit sworn on 14 October 2020; and
(b)His affidavit sworn on 28 January 2021.
The CSR maintained that under Schedule 1 to the Federal Circuit Court Rules2001 (Cth) (“the Rules”), a scale amount of $3,604.00 would apply for an appeal concluded at least 4 weeks before the final hearing. The CSR, further, submitted that there was a great difference between what the CSR would recover under that scale amount and the costs it had, in fact, incurred. While the CSR did not seek indemnity costs, it submitted that costs on a party/party basis as agreed or assessed should be awarded and that an appropriate course would be for the parties to be given an opportunity to attempt to agree those costs within 35 days and, if there was no agreement at the end of that period, costs should be referred for taxation in accordance with r.21.02(2)(c) of the Rules.
The CSR sets out, in paragraph 3 of the affidavit of Mr B affirmed on 22 January 2021, the costs incurred by it, particularising the works carried out in items (a) through to (r), as set out therein.
Mr B said the legal work amounted to in excess of 40 hours of senior solicitor time, which did not incorporate the costs associated with the hearing before Judge Street on 12 September 2019, which were not being sought. Further, that additional work was then anticipated to be done. The additional work anticipated to be done and not yet billed included preparing for and instructing Counsel at the hearing of the interlocutory application on 5 February 2021 and reviewing and reporting on the judgment.
Mr B deposes that, at the time of his affidavit, the CSR had incurred disbursements in the proceedings in the sum of $6,429.91 excluding GST, which did not include Counsel’s invoice for the preparation of submissions and the attendance at hearing. No source documents were provided in respect of those figures. In the circumstances, Mr B said that the CSR was seeking its costs on a party/party basis in the amount of $27,000.00, excluding GST.
The applicant maintained that the CSR’s costs application should be dismissed and, on the basis of the authority in Re Minister for Immigration and Ethnic Affairs Ex parte Lai Qin (1997) 186 CLR 622 (“Lai Qin”) where an unsuccessful costs applicant was ordered to pay the costs of the costs application, the CSR should be ordered to pay the applicant’s costs of the costs application. Further, as to the basis for an assessment of those costs, the behaviour of the CSR as contrary to the role of the model litigant, as described below, would warrant an order that such costs be assessed on an indemnity basis. In that regard, he sought the sum of $4,840.00 inclusive of GST charged by his Counsel, Mr Matthews, together with his anticipated costs of Counsel attending at the hearing on 5 February 2021, being $2,640.00, totalling $7,480.00, inclusive of GST. In terms of the application of Schedule 1 of the Rules, he maintained that his costs would be in the order of $4,672.00, being initiating or opposing an application up to the completion of a first court date of $2,992.00, together with $1,120.00, being item 13(b), with an advocacy loading of 50 per cent of item 13(b), being $560.00, totalling $4,672.00.
On the hearing on 5 February 2021, the CSR was represented by Ms Davidson of Counsel. The applicant was represented by Mr Matthews of Counsel.
LEGISLATIVE BASIS
Both Ms Davidson and Mr Matthews agreed with the statement, as set out in paragraphs 8 and 9 of the written outline of submissions prepared on behalf of the CSR by Ms Davidson dated 23 April 2020, in relation to the Court’s power to grant costs. The Court incorporates and accepts that position, as follows:
8. The award of costs in these proceedings is governed by s 79 of the Federal Circuit Court of Australia Act 1999 (Cth) (“FCC Act”). Section 79(1) provides that this section does not apply to “family law or child support proceedings”, but that term is defined in s 5 of the FCC Act as, relevantly, proceedings under the Child Support (Assessment) Act 1989 or the Child Support (Registration and Collection) Act 1988. The appeal was brought pursuant to s 44AAA of the AAT Act , thus s 79(2) of the FCC Act (which provides that a Judge of this Court has jurisdiction to award costs in all proceedings other than those in respect of which another Act provides that costs must not be awarded) applies and the general rule in civil proceedings that costs follow the event is applicable: see eg Bond v Child Support Registrar (2018) 334 FLR 332 at [155] (“Bond”); Maple v Niu (No 2) [2018] FCCA 26 at [13]; Baldwin v Bartlett [2017] FCCA 928 at [68]. Section 79(3) of the FCC Act provides that the award of costs is in the discretion of this Court or a Judge of this Court, except as provided by the Rules of Court or any other Act.
9. The Court has a wide discretion as to the calculation of costs, pursuant to r.21.02(2) of the Rules. Pursuant to r.21.10, unless the Court otherwise orders, a party is entitled to costs in accordance with Pts 1 and 2 of Schedule 1 to the FCC Rules and disbursements properly incurred. Division 2 of Pt 2 of Schedule 1 deals with “costs for an appeal of a Tribunal or Child Support Registrar decision”.
The Court also accepts that the purpose of a costs order is to compensate or indemnify the person in whose favour it is made and not punish the person against whom it is made: Latoudis v Casey (1990) 170 CLR 534. The exercise of the costs discretion takes account of all the contextual circumstances of the litigation and the conduct of the parties: see eg Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (in liq) [2011] FCAFC 136 at [9].
Mr Matthews raised the conduct of the CSR as, potentially, grounding his client’s indemnity costs application. That conduct issue appeared to be based on an asserted non-compliance with the model litigant guidelines which, it would appear, form part of the Legal Services Directions referred to in s.55ZG of the Judiciary Act 1903 (Cth) (“the Judiciary Act”) and that “the behaviour of the model litigant” warranted an award of costs of the CSR’s costs application on an indemnity basis. The Court was not taken to any specific provision of the model litigant guidelines, save that the applicant asserted that the CSR had failed to act consistently in the handling of claims and litigation and so as to keep the costs of litigation to a minimum.
However, Ms Davidson submitted that, while there had been no contravention of these obligations, nevertheless, compliance with them was not enforceable except by or upon the application of the Attorney General and, further, that the issue of non-compliance may not, in fact, be raised in any proceeding (whether in a court, tribunal or other body) except by or on behalf of the Commonwealth.
Mr Matthews indicated that he was not aware of that provision. The Court directed on 5 February 2021 that Ms Davidson provide it with a brief written submission in terms of s. 55ZG of the Judiciary Act by 4.00pm on 12 February 2021 and Mr Matthews was given until 4.00pm on 24 February 2021 to provide any responsive submission.
BACKGROUND
On 21 December 2017, the applicant applied for a departure from the administrative assessment of child support, based on 6 of the statutory grounds for departure in s.117(2) of the Assessment Act.
On 4 April 2018, a delegate of the CSR decided that one of the applicant’s reasons for departure had been established but that it would not be just and equitable to depart from the formula assessment. The applicant lodged an objection to that decision on 2 May 2018, which was disallowed. The applicant sought a review of the decision by the AAT on 16 August 2018.
On 22 January 2019, the AAT determined, the applicant’s claim based on 6 grounds of departure from the administrative assessment and considered each of these and found that the ground for departure in s.117(2)(c)(ii) of the Assessment Act had been established, on the basis that the applicant had transferred a significant amount of property on behalf of the children and that this constituted a special circumstance supporting a departure from the formula assessment under s.117(2)(c)(ii) of the Assessment Act: AAT decision at [32].
In considering the terms and period of departure from the administrative assessment, the AAT rejected the applicant’s submission that he had met the full cost of the children’s accommodation, but accepted that his contribution was significantly greater than that of the first respondent and also that his extra contribution delivered a “substantial and quantifiable benefit to the children that should be taken into account in the child support assessment”: at [73]. The AAT found that the sum of benefits provided by the applicant outside the child support assessment could be quantified at $50,000.00 and that, having regard to his income tax rate, the applicant would need to earn $95,000.00 in gross income: at [75]. The AAT found that it would be just and equitable to reduce the applicant’s adjusted taxable income (“ATI”) by this amount, pursuant to ss.98C and 98(1)(g) of the Assessment Act. Accordingly, the AAT set aside the decision under review and decided to depart from the administrative assessment of child support pursuant to the Assessment Act by reducing the applicant’s adjusted taxable income by $95,000.00 for the period 21 December 2017 – 31 December 2020. An appeal to this Court on a question of law was available pursuant to s.44AAA(1) of the AAT Act.
On 27 February 2019, in the General Federal jurisdiction of this Court, the applicant filed a Notice of Appeal, pursuant to s44AAA of the Administrative Appeals Tribunal Act 1975 on the questions of law arising from the decision of the AAT made on 22 January 2019, as referred to in paragraph 1, above.
The Registry of this Court directed that the CSR be notified as to the proceedings pursuant to s.98D of the Child Support (Registration and Collection) Act 1998 (Cth) (“the Registration and Collection Act”).
The first respondent filed a Cross Appeal on 4 April 2019.
On 30 April 2019, the applicant filed an Amended Notice of Appeal which, contingently, put in issue, inter alia, whether the Assessment Act, based on certain propositions being advanced by the first respondent, was a valid law of the Commonwealth. The applicant’s primary position was that the contentions advanced by the first respondent as to the effect of the Assessment Act, should be rejected as a matter of construction, however, he took the view that, if her contentions were accepted, they would put the validity of the legislation in issue.
On 6 May 2019, the first respondent discontinued her Cross Appeal.
The applicant maintained that, as he was obliged to do pursuant to s.78B of the Judiciary Act, the Commonwealth Attorney General and the Attorneys General of the States of the Commonwealth were then put on notice of the constitutional issue raised in the Amended Notice of Appeal.
Each of the Attorneys General chose not to intervene in these proceedings and confirmation of the same was provided.
The applicant maintained that “no constitutional question should arise”. However, he also maintained that that was the position provided the first respondent’s case in answer to his appeal did not revive her restrictive contentions as to the scope for review of administrative decision making, and in that case, it may arise in reply. The applicant agreed that the first respondent did not file any written submissions and, therefore, the position that she might take in argument could not then be known.
The CSR continued to participate in the appeal proceedings and advanced positions on all of the issues. On the point notified under s.78B of the Judiciary Act, the CSR submitted that it did not arise for decision. The Court notes that this corresponded with the primary thrust of the applicant although he maintained the reservation referred to in paragraph 33, above.
On 28 January 2020, the applicant and the first respondent reached an agreement in relation to concurrent family law proceedings in the Family Court of Australia and, as part of that agreement, entered into, inter alia, a Binding Child Support Agreement which, upon registration:
(a)Discharged any unpaid child support owing by the applicant to the first respondent; and
(b)Reduced the annual rate of child support payable by the applicant under any relevant administrative assessment by 100%.
In March 2020, the Binding Child Support Agreement was accepted by and registered with the Child Support Agency. The effect of the Binding Child Support Agreement being entered into between the applicant and first respondent was to eliminate the subject matter in these appeal proceedings and to, substantially, render moot all questions arising in those proceedings.
As referred to above, orders of the Court were made on 12 March 2020 in settlement of these proceedings save as to costs between the applicant and the CSR. While the CSR argued that there was some inherent tension in the formulation of those orders, that the proceedings would be withdrawn and dismissed (as agreed to between the applicant and the first respondent), the orders still preserved the question of costs in relation to the applicant and the CSR. In those circumstances, the Court does not accept the submission that, simply, because the proceedings were dismissed, costs in favour of the CSR would follow that event, in this case.
Further, the CSR contended that the appeal against the CSR would, in all likelihood, have failed had the matter proceeded to its conclusion and, in those circumstances, the CSR would have been entitled to its costs in opposing the appeal as it was a necessary party to the appeal, having regard to s.98D of the Registration and Collection Act and having acted, wholly reasonably, throughout the proceedings in making submissions with a view to assisting the Court and defending the constitutional validity of the Assessment Act. The CSR did not seek its costs of the hearing on 12 September 2019.
The Court accepts that where the CSR is entitled to appear in an appeal and has provided extensive written submissions, its discretion may be exercised to award costs to the CSR: see eg Maple v Niu (No 2) [2018] FCCA 26 (Judge Terry). The Full Court of the Family Court of Australia has observed (in a case in which s.117 of the Family Law Act1975 (Cth) applied, but having considered the alternative appellate pathway from decisions of the AAT not subject to that section) that while the CSR is funded by the public purse it “ought not to have to bear the costs of reasonably defending his position against an unreasonable attack”: Paxton & Child Support Registrar (Costs) [2016] FamCAFC 158 at [29].
The CSR also referred to additional matters, including its early indication to the applicant that, if he discontinued his application, the CSR would not seek costs. The CSR invited the applicant to discontinue the appeal at an early stage (28 March 2019) and put the applicant on notice of an intention to seek costs if the appeal was unsuccessful, but indicated that if the appeal was discontinued by 11 April 2019, the Registrar would not seek costs: Annexure “-2” to Mr B’s Affidavit. The applicant never replied to that correspondence.
While the CSR also submitted to the persistence of the applicant in pursuing the appeal, despite statements made by Judge Street during the case management hearings indicating that the appeal lacked prospects, also grounded a costs order in its favour, this Court ruled against the admissibility of such statements and, in those circumstances, the CSR did not maintain that submission.
The CSR also submitted that, after it was advised by the applicant that he and the first respondent had resolved their dispute, there was an engagement in correspondence with the applicant to seek to avoid having to move the Court for relief regarding costs but that the applicant had not been willing to agree any of the CSR’s costs.
The Court accepts that the following principles emanate from the judgement of McHugh J in Re Lai Qin at [624 to 625]:
(a)The power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion.
(b)When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action.
(c)The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided.
(d)In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
(e)But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
Lai Qin has been applied in numerous decisions of intermediate appellate courts, including the NSW Court of Appeal: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; the Full Court of the Family Court of Australia: Volker and Anor & Dunwell and Anor [2013] FamCAFC 169 and the Victorian Court of Appeal: Zhao v Suzhou Haishun Investment Management Co Ltd [2020] VSCA 34.
The applicant, therefore, submitted that for the Court to engage with the CSR’s submissions, as to the merits of the case, was a futile and impermissible exercise.
The Court, noting the above, expressed its concerns that its resources should not be taken up unnecessarily in determining a costs application based on it seeking to determine the outcome of a hypothetical case before it when that case had not been run. It is accepted that there has been no hearing on the merits, in the present case. While there may be an appropriate case for a Court to make an order for costs in the absence of such a hearing, it must be noted that the exercise of the Court’s discretion in such circumstances would be limited and determined by the circumstances of each case, including the conduct of the parties. The Court does not accept that this is such a case, in general terms.
Nevertheless, in terms of dealing with the submissions of the CSR as to the merits of the appeal, the Court notes the following, referrable to the various grounds raised.
As to Ground 3 in the Notice of Appeal, the applicant sought (in prayer 2 in the Notice of Appeal, see Annexure “-4” to Mr B’s Affidavit) a variation to the AAT’s decision, to reduce his annual rate of child support to nil for the period from 27 June 2016. His identification of issues in the appeal and his written submissions focused on the method the AAT selected to reflect its decision to depart from the administrative assessment under s.98(1)(g) of the Assessment Act, namely by reducing his ATI. The applicant submitted that reducing the ATI by the amount contributed left him “subject to assessment for payment of support he has already contributed”: Applicant’s Submissions filed 9 August 2019 (Annexure “-6” to Mr B’s Affidavit at 60, 61 & 70). This was said to involve “double payment” by the applicant or “a double recovery” by the first respondent.
The CSR submitted that the applicant’s contention that reducing his ATI by the amount he contributed to the children’s housing expenses rendered him subject to assessment for payment of support he had already contributed was, plainly, incorrect. As the CSR submitted in the formula under s.35 of the Assessment Act, the ATI figure is one integer used to derive a person’s Child Support Income, which is then used to calculate each parent’s Income Percentage (ie, each parent’s Child Support Income divided by the combined total). The parent’s cost percentage (share of costs met directly) worked out in subsequent steps of the formula is then deducted from the Income Percentage previously calculated, to derive the Child Support Percentage. This is then applied against the costs of the children (separately calculated), to arrive at the child support amount payable. Thus, the Child Support Percentage is directly affected by a parent’s Income Percentage, which will reduce as the parent’s ATI reduces. By reducing the applicant’s ATI, his Income Percentage, as a component of the statutory formula, also reduced. Furthermore, he was no longer subject to assessment on the $95,000.00 of income that the AAT held he would need to earn in order to net the $50,000.00 in benefits provided to the children by way of accommodation; that amount was simply not taken into account for the purposes of the formula. The applicant’s disagreement with the result of the application of the statutory formula did not indicate legal error on the part of the AAT. The Registrar accepted that it would have been open for the AAT, having decided to depart from the formula assessment pursuant to Pt 6A of the Assessment Act, to vary the annual rate of child support payable by the applicant, pursuant to s.98S(1)(a). However, it was equally open to the AAT to vary the applicant’s adjusted taxable income, pursuant to ss.98C and 98S(1)(g). This is what the AAT found was just and equitable (AAT at [75]), explaining that it had considered all the circumstances as required by the Assessment Act. The AAT retained a discretion to select between the various determinations available under s.98S(1). The CSR submitted that, in such circumstances, the AAT’s exercise of that discretion did not miscarry and this Court could be, comfortably satisfied, that the AAT did not fall into any error of law such as would have justified upholding the appeal. While the Court understands the basis of the CSR’s submission, it does not, on this application, determine that the applicant would have demonstrably failed on this ground of appeal and that this was meritless.
As to ground 4 in the Notice of Appeal, the applicant contended that the AAT erred by failing to take into account his submissions on “proper needs”. The error was said to arise from the AAT’s reasons at [71]. The CSR maintained that the AAT did not fail to take into account the applicant’s submissions on “proper support” but rather decided that the issues of his son’s conduct raised by those submissions were not relevant to its determination and thus should not affect the result. It expressly stated that it had “carefully consider[ed]” those submissions: AAT at [71]. The only aspect of the applicant’s submissions the AAT said that it had decided was not relevant and went to the “issues concerning the care of [the applicant’s son] and the provision of proper support” (see the AAT’s reasons at [71]). This appears to be a reference to the applicant’s submissions (by reference to family provision legislation) that “proper” support is influenced by the conduct of the relevant child. To the extent the AAT decided not to consider issues of a child’s behaviour on the basis of a determination that they were not relevant to the decision before it on review of the Registrar’s assessment of child support, the CSR maintained that this was the correct approach, having regard to the AAT’s task pursuant to the Assessment Act and did not involve any error. While the CSR maintained that the applicant’s argument on ground 4 relied on case law concerning the wholly distinct field of family provision legislation and did not identify any authority suggesting that a child’s behaviour towards the parent liable to pay child support was relevant to the question of what constitutes the child’s “proper needs” for the purposes of the objects clause in s.114(a) of the Assessment Act, nor indeed how that objects clause could play a determinative role in the AAT’s task under s.117, the Court is of the view that it is not in a position, on this application, to determine that the applicant would have almost certainly have failed to make out this ground of appeal and that that ground was meritless.
In terms of paragraphs 48 to 50 above, the Court accepts that it is not in a position, in terms of the current application before it, to conclude that the applicant’s claim in respect of the above grounds presented a “hopeless” and not fairly arguable case.
The CSR conceded that the applicant’s challenge to the validity of the Assessment Act was raised dependent on the first respondent’s position and was maintained against the possibility that his preferred construction of the Assessment Act which accepted its validity, would not be accepted: see Annexure “-5” to Mr B’s affidavit.
The Court accepts that the applicant’s position, therefore, left the CSR in the position of needing to respond to his constitutional challenge, even though the extent to which the applicant sought to pursue it was unclear. In those circumstances, the Court accepts the CSR’s conduct in the appeal as to this issue, having regard to its role in the administration of the Assessment Act, was reasonable.
In that regard, the applicant’s constitutional argument appeared to be premised on the assumption that the imposition of a child support liability was an “acquisition of property” susceptible to the “just terms” guarantee in s.51(xxxi) of the Commonwealth of Australia Constitution Act 1900, which relevantly states:
51.The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
…
(xxxi)the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws;
…
The applicant submitted that because of the settlement of the proceedings between himself and the first respondent, it has not been necessary to resolve that constitutional point and there is no basis on which to ask the Court to resolve it now. Accordingly, the applicant maintained that this issue afforded no ground for any costs application and was irrelevant.
The Court accepts, however, that the applicant’s assumption, in this regard, is contrary to authority binding on this Court: see Laurie v Child Support Registrar [2009] FamCAFC 183 at [102]-[107], [114] (special leave refused: GL v CSR [2010] HCATrans 102); Davis v Insolvency and Trustee Service Australia (No 3) [2010] FCA 69 at [50]-[51]; see also Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 at 202 (note 51) per Dawson and Toohey JJ; In the marriage of Gould (1993) 115 FLR 371 at 374 per Nicholson CJ and Finn J, 396-400 per Fogarty J; Neetmanski v Child Support Registrar [2009] FMCAFam 200 at [58]-[59].
In that regard, the Court accepts that the applicant’s constitutional argument had no reasonable prospect of success and his conduct of the proceedings so far as he maintained it, was unreasonable, noting, however, it was maintained on a very limited basis.
APPLICANT’S SUBMISSIONS
While the CSR argued that it had sought to resolve these proceedings with the applicant, it did so on the basis that the applicant would pay costs. On 31 January 2020, the applicant sought that the CSR enter into consent orders which had the effect of withdrawing and dismissing these proceedings with no order as to costs with the intention that each party pay their own costs. The applicant maintained that the CSR dismissed this proposal and advised, without any explanation as to the basis of the same, that it intended to pursue a costs application against him. The applicant maintained that this was conduct which was, in part, inconsistent with obligations to act as a model litigant under the model litigant rules and, in particular, the obligation to keep the costs of litigation to a minimum, including monitoring the progress of the litigation and using methods that it considers appropriate to resolve the litigation, including settlement offers. The applicant maintained that, in an email dated 31 January 2020, he sought an explanation of the basis of the CSR’s claim for costs and submitted that no response was provided by the CSR. The applicant maintained that he reiterated such a request in his email correspondence of 10 March 2020 as, he stated, he was not in a position to consider the offer of compromise promoted by the CSR until an explanation was provided and he had received no response to this request. The applicant maintained that the first time he learnt of the basis of the costs application was in the written submissions filed contemporaneously with the Application for Costs made by the CSR on 23 April 2020.
In that regard, the applicant submitted that the quantum of the CSR’s cost claim at scale was the “princely” sum of $3,604.00. It would appear that the CSR had agreed to accept $12,000.00 (more than 3 times the scale figure) in settlement of its costs application. The CSR’s written submissions concede that their costs were likely to be more than what was available to them at scale.
In relation to prior offers of settlement, the CSR rely on their email correspondence dated 28 March 2019 in which the applicant was informed that costs would be sought against him if he did not discontinue his appeal and he was, ultimately, unsuccessful. In that regard, the applicant argues that he has not been unsuccessful as there has been no determination because of the settlement.
Moreover, from a practical point of view, the applicant maintained that the effect of the Binding Child Support Agreement entered into with the first respondent, was that he was wholly successful in having his child support liability reduced to nil.
The applicant maintained that given the CSR took no role in the proceedings in the AAT, or otherwise, advanced any submissions there, it should not now be permitted to do so, in this Court. The applicant maintained that it was elementary that a party was bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party to raise a new argument which, whether deliberately or by inadvertence, was not put during the hearing when there was an opportunity to do so (Metwally v University of Wollongong [1985] HCA 28; 158 CLR 447). This is a regular rule of appellate practice that applies to the Government as much as to any other litigant. This was a, further, ground on which the CSR was not entitled to seek or obtain costs.
The applicant, further, submitted that while the CSR contended that it was entitled to make submissions on the appeal with a view to “assisting the Court”, including having regard to its role in the administration of the Assessment Act, that should be confined to a non-partisan and limited role of, for example, providing relevant information, statistics or the like, where necessary for the proper determination of the proceedings. In that regard, the applicant maintained that the CSR was not, simply, “assisting” in the administration of justice but rather engaging in an unnecessary adversarial contest which was, in itself, contrary to the model litigant rules and was also, in effect, demonstrated by its current application for costs. The Court does not accept that the CSR’s role would be so limited and that the CSR, if it considered the applicant’s case did not accord with how the CSR would otherwise calculate child support obligations, then it would be obligated to put such information before the Court, in any event.
The Court sets out below the parties’ competing submissions referrable to the model litigant rules.
The CSR submitted as follows:
(a)The Commonwealth’s obligations to act as a model litigant are set out in Appendix B to Schedule 1 to the Legal Services Directions 2017 (Cth). Those directions are issued pursuant to s.55ZF of the Judiciary Act, which provides for the Attorney-General to issue Legal Services Directions applying to Commonwealth legal work. Section 55ZG of the Judiciary Act specifies which persons or bodies must comply with Legal Services Directions.
(b)That there had been no contravention of its model litigant obligations, in any event.
(c)Note 5 to Appendix B to Schedule 1 to the Legal Services Directions 2017 (Cth) states that the obligation to act as a model litigant does not prevent the Commonwealth from enforcing costs orders or seeking to recover its costs.
(d)The CSR has acted consistently with model litigant obligations, in circumstances where it has properly incurred costs from the public purse as a necessary respondent to what, in the CSR’s submission, was an unmeritorious appeal brought by the applicant.
(e)Whilst the applicant was within his rights to make the forensic decision not to take up the CSR’s invitations to discontinue the appeal, the CSR and, by extension, the public was entitled to seek to be indemnified in respect of the costs incurred.
(f)Section 55ZG(2) of the Judiciary Act provides that compliance with a Legal Services Direction is not enforceable except by, or upon the application of, the Attorney General.
(g)Section 55ZG(3) of the Judiciary Act provides that the issue of non-compliance with a Legal Services Direction may not be raised in any proceeding (whether in a court, tribunal or other body) except by, or on behalf of, the Commonwealth.
(h)The Commonwealth’s model litigant obligations under the Legal Services Directions do not create any private rights in other parties to litigation and that, by operation of s.55ZG(3), only the Commonwealth may raise the issue of non-compliance with those obligations in a proceeding.
(i)The High Court of Australia in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 held that the Court of Appeal of the Supreme Court of NSW was wrong to find that ASIC had breached a duty of “fairness” in failing to call a witness. In his separate judgment, Heydon J referred to s 55ZG(3) at [239] and explained that “The Commonwealth has the same rights as any other litigant. It has the same powers to enforce those rights”. His Honour accepted a submission by the Solicitor General that the duty to act as a model litigant requires the Commonwealth and its agencies to “act fairly, with complete propriety and in accordance with the highest professional standards, but within the same procedural rules as govern all litigants. But the procedural rules are not modified against model litigants — they apply uniformly” at [240].
(j)In Croker v Commonwealth of Australia [2011] FCAFC 25, the appellant had claimed that the Commonwealth had failed to comply with its model litigant obligations. The Full Court of the Federal Court of Australia (Siopis, Tracey & Gilmour JJ) held that it was not necessary for the trial judge to explore this issue further because compliance with the Legal Services Directions was not enforceable by the appellant and could not be raised in any proceeding other than by or on behalf of the Commonwealth: at [19].
(k)The validity of s.55ZG of the Judiciary Act was challenged in Caporale v Deputy Commissioner of Taxation (2013) 212 FCR 220 (“Caporale”). Justice Robertson rejected that challenge. His Honour considered the operation of Appendix B to Schedule 1 to the Legal Services Directions and held that no private rights were conferred by that Appendix: at [39]. His Honour added (at [44]) that “the Directions are a means of control by the Attorney-General of Commonwealth legal work. In my opinion they are not designed to create obligations owed by the persons or bodies referred to in s 55ZG to others, especially other litigants”. His Honour noted that the Legal Services Directions themselves contain sanctions for non-compliance, in item 14: at [46]. He found (at [50]) that s.55ZG(3) was reflective of the “limited scope and nature of the obligations” that arise under, in particular, Appendix B to Schedule 1 to the Legal Services Directions. He added that this subsection “is a corollary of the limited nature of the obligations and to whom they are owed: a litigant may not rely on a breach of an obligation not owed to him or her”: at [50].
(l)Justice Robertson in Caporale also extracted the Explanatory Memorandum in relation to Part VIIIC of the Judiciary Act (which includes s.55ZG), finding that this supported his construction of the language of the provision: at [48]. In relation to s.55ZG(3), the Explanatory Memorandum to the Judiciary Amendment Bill 1998 stated:
“Non-compliance with the Directions will be able to be raised in proceedings only by or on the application of the Commonwealth (new subsection 55ZG(3)). Thus, it will not be possible for a party other than the Attorney-General or the Commonwealth to assert non-compliance as the basis of any claim or defence in legal proceedings. In particular, it is not intended that litigants opposed to the Commonwealth should be able to rely on the Directions to challenge Commonwealth actions. Rather, the question of compliance with the Directions should be a matter primarily between the Attorney-General as First Law Officer and the relevant Department or agency. Any other approach could give rise to technical arguments and result in additional costs and delay in litigation involving the Commonwealth …”
(m)More recently, in Tran v Minister for Home Affairs [2019] FCA 1126, Derrington J referred to s.55ZG(3) and held, consistent with the above authorities, that nothing in Appendix B to the Legal Services Directions creates rights for other parties to litigation. Rather, the consequences for a failure to meet those standards are found in item 14.1 of those Directions: at [34]. Furthermore:
“… there is nothing which suggests that other parties in litigation are entitled to rely on their non-observance as a foundation for gaining some forensic advantage. Indeed, s 55ZG(2) provides that compliance with a Legal Services Direction is not enforceable except by, or upon the application of, the Attorney-General.”
(n)In the present case, consistent with ss.55ZG(2) and (3) of the Judiciary Act and the authorities discussed above, the applicant has no rights (including no right to indemnity costs) based on the alleged non-compliance with Appendix B to Schedule 1 to the Legal Services Directions. The effect of s.55ZG(3) is that he is unable to rely on the alleged non-compliance as a reason for rejecting the CSR’s costs application or as a basis for his application for costs of the costs application. It is not necessary for the Court to further consider the asserted non-compliance with model litigant obligations for the purposes of resolving the costs application.
(o)The CSR was unable to identify the issue of the application of any penalty for a found breach of s.55ZG(3) of the Judiciary Act.
The applicant submitted as follows:
(a)In his judgment in Caporale, Robertson J referred to a number of decisions which considered the obligation of a Commonwealth body to conduct itself in accordance with the Model Litigant Rules.
(b)For example, in Phillips, In the matter ofStarrs & Co Pty Limited (In Liquidation) v Commissioner of Taxation [2011] FCA 532, Lander J was dealing with a case where the Australian Taxation Office had failed to comply with a direction to file an affidavit in response to the plaintiffs’ affidavit in support of the plaintiffs’ originating process. His Honour made an order extending the time within which the defendant had to comply but ordered that the defendant pay the plaintiff’s costs on an indemnity basis, such costs to be paid immediately upon taxation. His Honour said the Australian Taxation Office was a well-resourced agency or instrumentality of the Crown and a model litigant which was obliged to comply with any directions made by this Court. It was not entitled nor was the Commissioner entitled to disregard any directions of this Court. Robertson J noted however at [31] that Lander J was not considering any question concerning the operation or validity of s.55ZG of the Judiciary Act 1903.
(c)Similarly, in Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd (No. 2) [2010] FCA 1224; (2010) 190 FCR 11, Logan J was considering an application made on behalf of the Deputy Commissioner for professional costs as well as outlays. Amongst other reasons for refusing that application, His Honour said at [47]-[48]:
[47]All in all, the position which obtains is a confusing one. That confusion is caused by a failure to adhere to the requirements of the Federal Court Rules in relation to a signification of a party acting by a solicitor. Tellingly, in relation to the giving an address for service, there is nothing which alerts the defendant corporation to the fact that a solicitor acts for the plaintiff. I am not persuaded that there is a solicitor on the record.
[48] In the face of that and having regard to the requirements of the Federal Court Rules, the officers and members of Clear Blue Developments were, in my opinion, entitled to assume that, in the event of a winding up order being made, costs of the plaintiff would be limited to outlays, as is the case where a litigant acts for him or herself. For this reason also, I do not propose to award professional costs to the Deputy Commissioner. Indeed, so to do would be to reward work which is not of a standard to be expected of a person asserted to be solicitor on the record for a person to whom model litigant obligations adhere. The Deputy Commissioner's outlays are said to be $1,248.86. I order that those costs be the Deputy Commissioner's costs in the winding up.
(d)Again Robertson J at [29] observed that Logan J does not appear to have been considering any question of the operation or validity of s.55ZG of the Judiciary Act. That his Honour was dealing with a narrow point, compliance with the rules of this Court in relation to the presence of a solicitor on the record, is made clear by Logan J’s later decision Deputy Commissioner of Taxation v Croftworth Property Holdings (No 2) Pty Ltd (No 2) [2011] FCA 373 at [10].
(e)Consistent with these decisions and Robertson J’s observations, in Nelipa v Robertson and Commonwealth of Australia [2008] ACTSC 16 (6 March 2009), the plaintiff relied on the fact that the first defendant was a Commonwealth officer and the second defendant was the Commonwealth and so bound by the obligation to conduct themselves as model litigants of which they had failed to do.
(f)Whilst ultimately, no finding was made that there had been a failure to comply with the Model Litigation Rules, Refshauge J observed at [97] that it is not the function of the court to ensure compliance with the Directions or to become the disciplinary tribunal for alleged breaches. Nevertheless, it is clear that the obligation to act as a model litigant and the failure to act in that way can be a relevant factor in considering the appropriate order as to costs.
(g)Refshauge J relied on Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 1568 where Mansfield J stated at [18]:
It is convenient at this point to deal with one contention made by the first respondent concerning the conduct of the second applicant. It is axiomatic that the reasonableness of the conduct of a litigant, for the purposes of a claim for indemnity costs, must be measured having regard to the nature and role of the particular litigant: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. The authority indicating that the Crown must act, and be seen to act, as a model litigant is longstanding: Melbourne Steamship Co Ltd v Moorehead [1912] HCA 69; (1912) 15 CLR 333 at 342 per Griffith CJ. That principle has been adopted and applied on many occasions. However, there is nothing in this matter about the conduct of the second applicant which indicates any departure on its part from the standard of conduct applicable to a model litigant. I do not therefore regard that consideration as one which affects the exercise of the discretion more favourably to the first respondent than would otherwise be the case. The written submissions of the first respondent did not identify particular conduct of the second applicant which, it contended, involved a departure from the standard of conduct expected of the second applicant. Their focus was upon the various claims having been pursued at all. I did not perceive in the course of the hearing or in the pre-trial proceedings any particular conduct on the part of the second applicant which would be categorised as conduct which departed from that expected of the Crown. It did not conduct the proceedings in a harassing way, or seek to use its power or resources in any unfair way as against the respondents. It is apparent, notwithstanding that the first respondent is an independent statutory authority, that the resources available to it to conduct the proceedings did not disadvantage its conduct of the proceedings in any way, or in any way of which a model litigant might have taken advantage.
(h)In ACCC v ANZ (No. 2) [2010] FCA 567, the ACCC issued a large number of interrogatories out of time and a hearing was held on its entitlement to do so. The ANZ contended that the ACCC was required to act as a model litigant and, therefore, it ought to have delivered the interrogatories within the time limited by the initial order. Its failure to do so made a further application necessary and it ought to pay the costs of that application. Further, ANZ argued that acting as a model litigant required the ACCC to discharge the chief obligations of the interrogator and frame the questions as clearly and concisely as possible and to ask only those questions which really require an answer. ANZ relied upon the observations of Refshauge J in Nelipa v Robertson [2009] ACTSC 16 at [97] (see paragraph (e), above). An order was made against the ACCC to pay 80% of the ANZ’s costs.
(i)In any event, it is important to note the limited field of operation of ss 55ZG(2) and (3). In Caporale at [50], Robertson J accepted that to the “extent that the common law has recognised any principles that govern or regulate the conduct of political or public bodies involved in litigation (see Melbourne Steamship Co. Ltd v Moorehead [1912] HCA 69; (1912) 15 CLR 333 at 342 and Scott v Handley [1999] FCA 404; (1999) 58 ALD 373 at [43]- [44]), ss.55ZG(2) and (3) say nothing about who may seek to agitate, rely upon or enforce obligations said to arise under such principles forming part of the common law.”
(j)The sole effect of ss.55ZG(2) and (3) is in relation to obligations that arise under Legal Services Directions made under s.55ZF of the Judiciary Act.
(k)Consistent with the research conducted by Counsel for the CSR, no penalty has been identified in relation to a found breach of s.55ZG(3).
The Court is of the view that the CSR’s application for costs is not inconsistent with its obligations as a model litigant. The Court does not make any finding that there was any breach of the CSR’s position as a model litigant and is of the view it does not have jurisdiction to determine that question on this application and adopts the matters as set out in paragraph 65(j) above, in that regard.
The Court is of the view that there should be, however, some costs awarded to the CSR in terms of its appearance in this Court and in terms of its preparation of written submissions, referable to the grounds of appeal. The Court is of the view that such costs should be in accordance with the application of Schedule 1 under the Rules. Further, the Court is of the view that the applicant should be ordered to pay the costs of the CSR in respect of its assistance to the Court in the preparation of any submissions relevant to the constitutional argument raised by the applicant which was not pressed in light of the settlement of the proceedings and in light of the position adopted by the first respondent. In that regard, the Court notes from a perusal of the submissions of the CSR that it, substantially, accepted that the validity of the Assessment Act did not arise and that the CSR would then seek leave to file further submissions to deal with any specific argument the applicant sought to make in terms of invalidity. No such further submissions were, accordingly, filed. Therefore, the Court assesses the CSR’s costs in respect of that issue in the sum of $500.00.
The Court is of the view that the CSR should be entitled to the costs as calculated under Schedule 1 together with the sum of $500.00 in terms of its additional submissions referrable to the constitutional point raised, as referred to above. The applicant should, therefore, pay the costs of the CSR in the sum of $3,604.00 plus $500.00, totalling $4,104.00.
The Court is of the view that both parties had reasonable positions to argue in terms of the costs application and while each has had a degree of success, each has also had a degree of lack of success. There should, therefore, be no costs order in respect of the costs application, itself.
Conclusion
The Court is of the view that the applicant should be given 30 days to effect payment of the costs referred to in paragraph 69, above.
The matter is, otherwise, removed from the active pending cases list.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Kemp. Associate:
Dated: 26 July 2021
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