Innocenti & Napoliello (No 2)
[2022] FedCFamC1F 75
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Innocenti & Napoliello (No 2) [2022] FedCFamC1F 75
File number(s): WOC 896 of 2018 Judgment of: CAMPTON J Date of judgment: 22 February 2022 Catchwords: FAMILY LAW – COSTS – Where a declaration was made pursuant to s 90RD of the Family Law Act 1975 (Cth) that the parties were in a de facto relationship for a period of four years – Where the respondent resisted the making of a s 90RD declaration and denied that the parties were in a de facto relationship within the meaning of s 4AA of the Act –Where the applicant contended the parties were in a de facto relationship for a longer period of time than was found to be the case and was not wholly successful – Where the respondent’s absence of success in her challenge to jurisdiction is a justifying circumstance warranting an order for costs – Whether the respondent shall pay the applicant’s costs of the s 90RD proceedings, fixed in the sum of $12,000 and the applicant’s costs application fixed in the sum of $2,000, both payable within 21 days. Legislation: Family Law Act 1975 ss 4AA, 90RD, 90SM, 117
Federal Circuit and Family Court Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Schedule 3; r 12.07
Cases cited: Anison & Anison (2019) FLC 93-908; [2019] FamFC 108
Atkins & Hunt [2017] FamCAFC 131
Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23
Phillips & Hansford [2020] FamCAFC 28
Division: Division 1 First Instance Number of paragraphs: 46 Date of hearing: 11 February 2022 Place: Sydney Counsel for the Applicant: Ms Mitchell Solicitor for the Applicant: Hansons Lawyers Counsel for the Respondent: Mr Hodgson Solicitor for the Respondent: Mills Oakley ORDERS
WOC 896 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR INNOCENTI
Applicant
AND: MS NAPOLIELLO
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
11 FEBRUARY 2022
THE COURT ORDERS THAT:
1.That within 21 days of the date of this order the respondent pay to the applicant his costs of and incidental to the s 90RD hearing determined by way of Orders made on 22 December 2021 in the sum of $12,000.
2.That within 21 days of the date of this order the respondent pay the applicant his costs of the Application in a Proceeding filed 28 January 2022 in the sum of $2,000.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Innocenti & Napoliello has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
On 4 September 2018, Mr Innocenti, commenced proceedings for property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”). He is the applicant to both the substantive proceedings and this costs application. The applicant’s case was that the parties had been in a statutory de facto relationship from late 2007 to November 2016, being a period of nine years.
On 23 October 2018, Ms Napoliello filed her Response to an Initiating Application, seeking that the applicant’s Initiating Application be dismissed. Her case was that she and the applicant were never engaged in a de facto relationship within the meaning of s 4AA of the Act. Her alternate contention was that if the Court found a de facto relationship had existed between the parties, the total period of that relationship was less than two years.
The substantive matter was listed before me for the purposes of a declaration pursuant to s 90RD of the Act, being as to whether the parties had been in a de facto relationship, and if so, when the relationship began and when it was terminated. It was conducted over four days commencing on 16 November 2021.
On 21 December 2021, for reasons then provided, I made an Order pursuant to s 90RD of the Act that a de facto relationship commenced between the parties in April 2012 and terminated in November 2016.
On 18 January 2021, the applicant filed an Application in a Proceeding (“the Costs Application”) seeking that respondent pay his costs of and incidental to his Initiating Application filed on 4 September 2018 on an indemnity basis, in the amount of $46,279. By way of cascading alternatives, he sought that his costs be paid on an indemnity basis as agreed or assessed, or on a party and party basis as agreed or assessed, or at scale in accordance with Schedule 3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). During the course of the hearing for costs the applicant assessed that his costs in accordance with scale were $20,000.
The applicant’s s 90SM application initiated on 4 September 2018 identified “the proceedings”. That application is yet to be determined. The gravamen of his claim for costs is not of those proceedings, but as to the discrete s 90R hearing event.
In support of his application, the applicant filed an affidavit on 18 January 2021 and a Financial Statement on 10 February 2022. He also relied on an Outline of Case document.
The respondent by her Response to an Application in a Proceeding filed on 9 February 2022 sought that the Costs Application be dismissed, and in the alternative, that the determination of the Costs Application be reserved for the final hearing of the s 90SM proceedings. She also sought that the applicant pay her costs of the Costs Application.
The respondent relied on an affidavit filed on 9 February 2022 and a Financial Statement filed on 11 February 2022. She also relied on Written Submissions filed on 11 February 2022.
It was agreed that each parties’ costs at scale of and incidental to the hearing of the Costs Application before me were $2,000.
These reasons for judgment assume familiarity with the primary judgment
Innocenti & Napoliello[2021] FedCFamC1F 297, delivered on 30 November 2021.
THE LAW AND PRINCIPLES
The relevant principles with respect to costs are well settled, and are set out in detail in the Full Court decision of Atkins & Hunt [2017] FamCAFC 131.
While the general position established by s 117(1) of the Family Law Act is that each party should bear their own costs, s 117(2) allows a court to make such costs order as it considers just if there are circumstances which justify doing so.
In considering what order for costs should be made (if any) and in what form, a court is required to have regard to the considerations set out in s 117(2A) of the Act. The relevance of the particular matters will depend on the circumstances of each case.
It is well settled that no one factor has priority under s 117(2A), nor must more than one factor be satisfied; any one factor maybe sufficient. The discretion conferred by s 117 of the Act is a broad one, and the factors under s 117(2A) are not to be read in a restrictive way. I have considered each such relevant consideration as is relevant and engaged by each party in the circumstances of this costs application.
The Financial Statement of the applicant filed on 10 February 2022 records he is currently in receipt of Jobseeker payments, in the sum of $346 per week, or $18,041 per year. He has $180 in the bank, two motor vehicles of comparably modest value, owes $60,000 in credit card debt, $20,000 in personal loans and $30,982 to his current solicitors. At the hearing before me in November 2021, some four months ago, the applicant said he had earnt between $35,000 and $40,000 over the six month period prior. He also said that his annual income was about $50,000. I have no evidence to explain the differing contentions of the applicant at trial, nor as to why his income is so significantly less at this time.
The respondent’s Financial Statement filed on 11 February 2022 records that she continues to be self-employed operating her own enterprise, ‘Z Pty Ltd’. She records receiving a weekly income of $2,338 comprising of her salary and rental returns from an investment property owned by her. The respondent owns two real properties and personal property. Her cash at the bank is $10,873. Her total assets are recorded as having a value of $2,715,000 and her liabilities total $1,222,000, her net position being just less than $1.5 million.
The respondent’s financial circumstances are superior to the applicant’s. It was not submitted on behalf of the respondent that she had any incapacity to pay costs if ordered as sought.
The applicant was not wholly successful in the proceedings. His contention that the parties had been in a de facto relationship between 2007 and April 2012 failed. The primary position of the applicant as to the commencement of a de facto relationship from 2007 and continuing up to the period April 2012, on his evidence alone and irrespective of that adduced by the respondent, was overly optimistic.
The respondent’s case, for the reason identified in my primary judgment on 22 December 2021, records the volume of evidence not meaningfully considered or engaged with by the respondent in the conduct of her case. The finding at paragraph 171 of that judgment, being that the respondent “attempted to craft a distorted image of the circumstances of the relationship between the parties for the period from April 2012 until November 2016 for forensic gain” reflects her approach to and conduct of the proceedings.
Save and except as to Case Outline documents, each of the parties had filed and served the affidavit evidence they sought to rely upon by September 2019. The s 90RD issue was ready for hearing from that time. Neither party was responsible for the matter not being reached by Judge Altobelli (as he was then known) on its first trial listing on 26 and 27 September 2019 or on its second trial listing before Judge Smith on 13 July 2020. Neither party ought to be criticised for the manner in which the trial before me was conducted.
I do not accept the submission of the applicant that the respondent has been “wholly unsuccessful” in the proceedings.
In Anison & Anison (2019) FLC 93-908 the Full Court said as to s 117(2A)(e):
37.It is well settled that paragraph (e) refers to a situation where proceedings as a whole have been unsuccessful. For example, where an application without merit has been dismissed. In the oft-cited authority in this area of Robinson and Higginbotham earlier referred to, Nygh J (with whom Simpson & Smithers JJ agreed) said:
Her Honour then makes a reference to the question of which party was wholly successful but, of course, as counsel for the mother rightly submitted, paragraph (e) deals with a situation in which the proceedings as a whole have been unsuccessful. In other words, in which an application which was without merit has been dismissed.
That is not the case here. The respondent was unsuccessful on the jurisdictional issue. This issue was only part of the proceedings. The substantive s 90SM proceedings remain on foot to be either settled by agreement or decided by another judge of this Court.
I do not accept the respondent’s submission that the applicant was unsuccessful in the prosecution of his relief where that submission is focussed on a claim of a statutory de facto relationship being in existence from 2007 until 2016. I do not accept the submission of the respondent that the determination was “a bit of a draw, not an overwhelming win”.
SHOULD COSTS BE RESERVED
The respondent submitted that it would be appropriate to reserve any costs of the s 90RD determination until the determination of the applicant’s s 90SM claim. It was submitted that the substantive claim for adjustment may be dismissed, or may achieve only a modest sum, and each of these possibilities would be a relevant factor in determining this application for costs.
I do not accept that submission. The overarching purpose of the Rules of court and s 67 of the Federal Circuit and Family Court Act 2021 (Cth) require proceedings to be dealt with in an efficient, cost effective and expeditious manner. It is not just in these circumstances to “kick the costs issue down the road” for another judicial officer to determine. The s 90RD issue was a discrete hearing event determined by factual findings. Both parties have a raft of processes at their disposal to garner protection and insurance as to costs considerations and consequences of and in the purposes of the s 90SM dispute.
The respondent put squarely into issue the Part VIII AB jurisdiction sought to be prosecuted. Notwithstanding the reduced period for which a declaration was made as to a de facto relationship, the outcome of the trial was a determination against the respondent.
The respondent has put the applicant to significant legal expense in resisting the fact and terms of their de facto relationship. I find that the respondent’s absence of success in her challenge to jurisdiction is a justifying circumstance to warrant an order for costs being made against the respondent.
WHAT ORDER SHOULD BE MADE?
The applicant’s primary contention is that costs should be ordered on an indemnity basis. In relation to an award of indemnity costs, the recent Full Court decision of Phillips & Hansford [2020] FamCAFC 28, helpfully summarises the position as follows:
35.Indemnity cost orders are made only in exceptional cases.
36.Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise”.
37.In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” and where “a party persists in what should on proper consideration be seen to be a hopeless case”.
(Citations omitted)
The applicant submitted that the justifying circumstances for an award of indemnity costs of the threshold hearing is grounded from the finding at paragraph 171 of the primary judgment, as recorded at paragraph 19 of these reasons. I am mindful as to the failure of the applicant’s case from 2007 to April 2012. He persisted with that part of his case, when on proper consideration, he should not have done so.
I am not satisfied that the nature of this case is exceptional so as to warrant an order for indemnity costs.
The applicant’s affidavit records that as at 10 February 2022 he has incurred $48,203 in legal fees of these proceedings, $30,983 of which is unpaid. In addition to his costs notice, the applicant exhibited to his affidavit the costs agreement of his lawyers and separately the costs agreement of his counsel, and three invoices, being:
(a)Two invoices from Hansons Lawyers dated 26 September 2019 for the amount of $27,002, and 21 December 2021 for the amount of $5,805; and
(b)An invoice from Nicolas Ford of counsel dated 27 September 2019 for the amount of $14,279.
The respondent’s costs notice records that as at 10 February 2022, she has incurred $96,042 in legal fees of these proceedings, $13,254 of which is unpaid.
The applicant sought that any order as costs be fixed. His solicitor said that his costs if assessed on a party and party basis at scale would be $20,000.
The respondent opposed any fixing of costs. She sought that if ordered, costs be as agreed or assessed. Her counsel said that if pressed, the applicant’s costs on a party and party basis at scale would by the range of $15,000.
During the course of submissions each of the solicitor for the applicant and counsel for the respondent were directed to the assessments of each quantum of costs asserted by way of comparison with the Court scale costs, cast against the fee agreements entered by the applicant and then considered by way of contrast with the costs for the same work paid by the respondent.
Rule 12.17(a) permits the Court to adopt a course to fix costs, although it is accepted that it is entirely a matter of discretion. Some guidance as to the appropriate matters to be considered can be found in the judgment of Einstein J in Idoport Pty Limited v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23 at [9] where his Honour considered that:
1.For present purposes it seems convenient to commence with the recitation of the principles which inform the exercise of the discretion:
i.the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as “the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation” (All ER page 265)];
ii.the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16];
iii.the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith [2005] FCA 228; (2005) 215 ALR 788];
iv.a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22];
v.the gross sum “can only be fixed broadly having regard to the information before the Court,”: Beach Petroleum at 124;
[in Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enables fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that….is what the rule contemplates.”]
vi. nevertheless, the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120;
vii. in terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No. 2) (1995) 57 FCR 119, put the matter as follows, at [16]:
“On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary “fail safe” discount on the cost estimates submitted to the Court: Leary v Leary at 265….”
I have considered the amounts claimed by way of the applicant for party and party costs at scale and the basis for their calculation. I am satisfied taking into account the factors identified in Idoport that it is appropriate to fix costs as there is sufficient evidence to do so grounded from the basis of their calculation so as to make an assessment and order. The parties have been in litigation since 2018. I am mindful that they are continuing to engage in the s 90SM pathway. It is inevitable that the process of assessment of costs will in itself involve considerable further costs and delay.
Each party relied upon multiple affidavits that were often repetitive. This process unnecessarily duplicated costs.
This was hard fought litigation. It has persisted for some years. Each litigant has seized upon and taken every forensic point or position available. If parties elect to conduct litigation in this way they ought to understand that orders for costs will loom on the horizon. Litigants in this Court have an obligation to engage in litigation responsibly .The absence of reasonableness to the position of both the parties ought to be reflected in the quantum of the costs ordered.
I am satisfied that this is the case in which it is appropriate to fix an amount of party and party costs of the applicant of the s 90RD application as sought by way of his Application in a Proceedings for costs filed on 18 January 2022 in an amount of $12,000.
It is also appropriate for the respondent to contribute towards the applicant’s costs of his Costs Application. As already recorded in these reasons, she has the financial capacity to pay a costs order. The respondent has been unsuccessful in resisting a costs order. No evidence was adduced as to an offer made by the respondent to compromise the Costs Application.
At the hearing before me, each party agreed that their costs of the Costs Application should be fixed in the sum of $2,000 on a party and party basis.
The respondent shall be ordered to pay the applicant’s costs of the Costs Application at the sum agreed of $2,000, within 21 days of these orders.
On that basis I make the orders as set out in these reasons.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 22 February 2022
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